New Business is just being formed by 10 investors, each of whom will own 10% of the business. The firm is expected to earn $1,000,000 before taxes each year. The corporate tax rate is 35% and the personal tax rate for the firm's investors is 25%. The firm does not need to retain any earnings, so all of its after-tax income will be paid out as dividends to its investors. The investors will have to pay personal taxes on whatever they receive. How much additional spendable income will each investor have if the business is organized as a partnership rather than as a corporation? Show all work.
a. $26,250
b. $26,000
c. $25,000
d. $27,500
2. A law passed by Congress that requires the CEO and CFO of company to certify that their firm’s financial statements are accurate was part of the fowling act:
a. Economic act of 1946 b. Sarbanes-Oxley act of 2002 c. Investments act of 1940 d. Securities exchange act of 1934