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QUESTION
A firm in Australia earns a pretax profit of $10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate).
A firm in Australia earns a pretax profit of $10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate). The firm pays the remaining $7 in dividends to a shareholder in the 40% marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system?
