Homework Answers
(a) Debt Income = $ 1
Personal Tax = 35% of $ 1 = $0.35
Corporate Tax rate would be 35% = $0.35
Total $ 0.7
(b) $ 1 equity income
Capital Gains= $0.25 (25%)
Dividend Gain = $0.75 (75%)
Now Personal Tax = 35% of dividend gain = 0.35* 0.75 = $0.2625
Capital gain tax = 15% of $0.25 = $ 0.0375
Total Tax = $0.3
Corporate Tax = 35% of $1 = $0.35
Total = $0.65
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