When estimating a firm's WACC, the cost of preferred stock to the firm must be adjusted to an after tax codt because at least 70% of dividends recieved by a corporation may be excluded from the corporation taxable income True or false
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- Which, if any, of the following items has no effect on the stock basis of an S corporation shareholder? Operating income. Long-term capital gain. Cost of goods sold. Short-term capital loss. The 20% QBI deduction.Which statement below is incorrect in relation to the taxation of companies? A.Companies are not entitled to a discount on capital gains B.Dividends paid by a company are included in the assessable income of resident shareholders C.The (flat) rate of tax for companies is 30% (unless entitled to a lower rate of corporate tax) D.Companies are entitled to a 50% discount in capital gainsWhich of the following statements is CORRECT? Group of answer choices The component cost of preferred stock is expressed as rp(1 - T). This follows because preferred stock dividends are treated as fixed charges, and as such they can be deducted by the issuer for tax purposes. A cost should be assigned to retained earnings due to the opportunity cost principle, which refers to the fact that the firm’s stockholders would themselves expect to earn a return on earnings that were paid out rather than retained and reinvested. No cost should be assigned to retained earnings because the firm does not have to pay anything to raise them. They are generated as cash flows by operating assets that were raised in the past, hence they are “free.” Suppose a firm has been losing money and thus is not paying taxes, and this situation is expected to persist into the foreseeable future. In this case, the firm’s before-tax and after-tax costs of debt for purposes of calculating the WACC will both be…
- The following information has been gathered for Malette Manufacturing: Assume that the firm has no common stock equivalents. The tax rate is 34%. Required: 1. Compute the return on assets. 2. Compute the return on common stockholders equity. 3. Compute the earnings per share. 4. Compute the price-earnings ratio. 5. Compute the dividend yield. 6. Compute the dividend payout ratio.Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%. Required: 1. Compute the following: (a) return on sales, (b) return on assets, (c) return on stockholders equity, (d) earnings per share, (e) price-earnings ratio, (f) dividend yield, and (g) dividend payout ratio. 2. CONCEPTUAL CONNECTION If you were considering purchasing stock in Albion, which of the above ratios would be of most interest to you? Explain.To calculate diluted EPS, the accountant does all of the following except:adds back to net income any compensation expense recognized on the employee stockoptionsadds back any interest expense (net of taxes) on convertible bondsadds back any dividends on convertible preferred stock the firm subtracted in computingnet income to common shareholders.enters only the net incremental shares issued (shares issued under options minus assumedshares repurchased) in the computation of diluted EPS.
- The cost of dividend payable on redeemable preference shares should be included in______. Select one: a. in the statement of income after identifying profit after tax b. in the statement of income before identifying the profit before tax c. as a deduction in the statement of changes in equity d. in the statement of income as a deduction prior to identifying profit from operationsWhich of the following statements is true regarding the payment of dividends to preferred shareholders? O a. Payments to debtholders are paid before dividends are paid to preferred shareholders. O b. Dividends to preferred shareholders are a tax-deductible expense to the issuing company. O c. Dividends to preferred shareholders are paid before payments are made to debtholders. O d. Dividends to preferred shareholders are paid after dividends are paid to common shareholders.Which of the following statements is false? A. A corporation must file a Federal income tax return even if it has no taxable income for the year. B. Dividend received deduction is calculated as the dividend received times deduction percentage. C. A corporation cannot deduct net capital losses against its operating income. D. A C corporation with taxable income of $100,000 in the current year will have a tax liability of $21,000. E. Schedule M-1 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's income tax return.
- Which of the following statements is true regarding the dividends-received deduction? The dividends-received deduction is available for dividends received from foreign corporations. The dividends-received deduction is allowed to provide relief from triple taxation. Distributions received from S corporations are eligible for the dividends-received deduction. The stock can be held for only 30 days to be eligible for the dividends-received deduction.Indicate whether the following statements are true or false. If the statementis false, explain why.a. If a firm repurchases its stock in the open market, the shareholders whotender the stock are subject to capital gains taxes.1. What amount should be reported as income before tax in the financial statements? * 1. The financial statements of Kare-Kare Company for the calendar year ending December 31, 2021 are authorized for issue on March 30, 2022. Income before tax was computed at P50,000,000 before the following events occurred in the company: a. The company had investments in shares held for trading which were recorded at the fair value of P600,000 on December 31, 2021. During the period up to March 1, 2022, there was a steady decline in the fair value of all the shares in the portfolio, and on March 1, 2022, the fair value had fallen to P500,000. b. A customer owing the company P300,000 filed for bankruptcy on February 2, 2022. The company included in its financial statements an allowance for doubtful accounts pertaining to this customer of P100,000. c. A shipping vessel of the company with a carrying amount of P10,000,000 was destroyed at sea because of the missile fired by the Russian army which…
