Problem
VPS Ltd paid a fully-franked dividend of $0.14 per share on 15 November 2021. On the record date you owned 1000 VPS shares. VPS had a dividend reinvestment plan in operation at the time. Share were allocated under the DRP based on a market price of $5.0695, with no discount applicable. The marginal tax rate was 35% and the corporate tax rate was 25%.
1. What would be your before-tax dividend have been if you did not participate in the DRP?
2. What would your after-tax divided have been if did not participate in the DRP?
3. How many shares would have received under the DRP if nominated 100% of shares to participate in the DRP?
4. How much income tax would have been payable in respect of the shares allocated under the DRP?