Question

Assuming a tax rate of 50%, the after-tax cost of a $200,000 dividend payment is?

A. $200,000
B. $100,000
C. $-100,000
D. none of the above

please talk me through this one ...I am completely lost

Answer 1

I had a light bulb go off above my head.

this question is not about the math or numbers...it is a play on words.....

the after-tax cost of $200,000 dividend ......after-tax is the key

the only way to get to $200,000 after-tax of 50% is to have $400,000 or more before taxes, so the after-tax cost of a $200,000 dividend payment is $400,000 or more.

Then answer must be D...none of the above....is this correct???