Answer:
c. $ 4,420
Explanation:
In this question, we do the calculations based on the personal tax and corporation tax. So, the computation is shown below:
The profit before tax is $2,000,000
And, it holds 1% if the stock So,
The value would be = $2,000,000 × 1% = $20,000
After applying the corporate tax rate of 34%, the value would be = $20,000 - $20,000 × 34% = $20,000 - $6,800 = $13,200
After applying the personal tax rate of 35%, the value would be = $13,200 - $13,200 × 35% = $13,200 - $4,620 = $8,580
And, the personal tax rate is 35%, so after tax value would be:
= Value - Value × personal tax rate
= $20,000 - $20,000 × 0.35
= $20,000 - $7,000
= $13,000
Now subtract the both values after considering personal tax rate which equals to
= $13,000 - $8,580
= $4,420
