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What is annualized after tax rate of return

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Suppose you invest $100,000 in a C corporation for 10 years. You expect the corporation to earn 8% pa before any corporate taxes and any investor level taxes. The firm does not plan to pay any dividends over the 10 year period. You currently face a 40% tax rate on ordinary income, and 20% tax rate on capital gains. The corporation faces a tax rate of 35%. The tax rates are not expected to change.

Problem 1: What is your after-tax dollar accumulation at the end of the 10 year holding period?

Problem 2: What is your annualized after tax rate of return?

Reference no: EM132700114

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