Use the following information to answer the question(s)below.
d'Anconia Copper has $200 million in cash that it can use for a share repurchase.Suppose instead that d'Anconia Copper invests the funds in an account paying 5% interest for one year.Assume that the corporate tax rate is 35%,the individual capital gains rate is 15% and the individual rate on ordinary income is 30%.
-The amount of additional cash that d'Anconia Copper will have at the end of the year net of corporate taxes is closest to:
A)$2.0 million
B)$5.5 million
C)$6.5 million
D)$7.0 million

Question

Quizplus · Accepted Answer

C)Net amount = investment × interest × (1 - tax rate)= $200 million × 5% × (1 - 35%)= 6.5 million

Use the Following Information to Answer the Question(s)below