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Assignment #1 ANSWER SHEET 2018 Dr.Ruiz Name: Class: HSA 304 Date: End of Chapter Problem page 52 Question 2.1: Assume the provident health system, a for---profit hospital, has $1 million in taxable income for 2012, and its tax rate is 30 percent. A. Given this information, what is the firm’s net income? (Net income is what remains after taxes have been paid out.) B. Suppose the hospital pays out $300,000 in dividends. A stockholder, Carl Johnson, receives $10,000. If Carl’s tax rate on dividends is 15 percent, what is this after --- tax dividend? a. With $1 million of taxable income and a 30 percent tax rate, the hospital’s taxes are .30 × $1,000,000 = $300,000, and its net income is $1,000,000 – $300,000 = $700,000. Alternatively, after-tax income can be calculated as: AT = BT × (1 – T) = $1,000,000 × (1 – .30) = $1,000,000 × .70 = $700,000. b. AT = BT × (1 – T) = $10,000 × (1 – .15) = $10,000 × .85 = $8,500. End of Chapter Problem page 52 Question 2.2: A firm that owns the stock of another corporation does not have to pay taxes on the entire amount of dividends received. In general, only 30 percent of the dividends received by one corporation from another are taxable. The reason for this tax law feature is to mitigate the effect of
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