Question

Bryan Houlberg expects his C corporation to generate a profit of $200,000. What is Bryan's after-tax cash flow from the corporation if net income after corporate tax is distributed to him as a dividend and his marginal tax rate on ordinary income is 37%?

Answer 1

Answer:

$\ 117,937.50$

Explanation:

Corporate level tax on $200,000 is $61,250

Cash(After Corporate tax)= $\ 200,000 -\ 61,250=\ 138,750$

Individual tax on $138,750(15%)=$0.15\times138750=\ 20812.5$

Hence, net after tax cashflow :

$\ 138,750-\ 20,812.5\\=\ 117,937.50$