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How much additional cash will raviv have

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Question - Raviv Industries has $97 million in cash that it can use for a share repurchase. Suppose instead Raviv invests the funds in an account paying 8% interest for one year.

a. If the corporate tax rate is 38%, how much additional cash will Raviv have at the end of the year net of corporate taxes?

b. If investors pay an 18% tax rate on capital gains, by how much will the value of their shares have increased, net of capital gains taxes?

c. If investors pay a 28% tax rate on interest income, how much would they have had if they invested the $97 million on their own (in the same type of account paying 8% interest per year)?

Reference no: EM133128111

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