Statement of Retained Earnings

# Statement of Retained Earnings - . We assume that new...

This preview shows pages 1–5. Sign up to view the full content.

3. Statement of Retained Earnings Earnings are either paid to stockholders ( dividends ) or reinvested in the firm ( retained earnings ). 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Taxes Corporate income tax rates for 2005-2011 are: 2 Tax Rate \$0 \$50,000 15% \$50,001 \$75,000 25% \$75,001 \$100,000 34% \$100,001 \$335,000 39% \$335,001 \$10,000,000 34% \$10,000,001 \$15,000,000 35% \$15,000,001 \$18,333,333 38% \$18,333,334 + 35% Taxable Income
Taxes There are two ways to calculate taxes: Average Tax Rate Taxes ÷ Taxable Income Marginal Tax Rate Tax on an incremental dollar of earnings 3

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Taxes In making financial decisions, we are concerned with marginal taxes
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: . We assume that new decisions affect incremental income and, therefore, incremental taxes are above and beyond what was already being paid in taxes by the firm. 4 Average vs. Marginal Tax Rates In Finance, we are concerned with marginal tax rates, since we are usually evaluating new (incremental) cash flows. 5 Tax Rate Affected Earnings Taxes 0.15 \$50,000 \$7,500 0.25 \$25,000 \$6,250 0.34 \$25,000 \$8,500 0.39 \$100,000 \$39,000 \$200,000 \$61,250 Average Tax Rate = \$61,250 / \$200,000 = 30.63% Marginal Tax Rate = 39%...
View Full Document

## This note was uploaded on 01/24/2012 for the course FIN 4260 taught by Professor Victorwakeling during the Spring '12 term at Kennesaw.

### Page1 / 5

Statement of Retained Earnings - . We assume that new...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online