BPP 8. Arthur co may/june 2018 — OpenTuition Forums

TTJRSupporter4y ago

This answer is taken from a ii) dividend capacity required Increase in dividend remittances required = $88·8 million – $76·652 million = $12·148 million 1.sir my question is that for this incremental $12·148 million don't we have to pay an additional tax of 10%? 2. Total dividend remittance required = ($20.52 million + $12.148 million)/0.95 = $34·387 million here my question is that the $20.52 million this amount is already adjusted after withholding tax then why are we again grossing it up in this calculus? i think the answer should be like this: $20.52 million +( $12.148 million/0.95) = $33.307

John MoffatTutor4y ago#1

1. No. The 10% extra tax is based on the profits of Bowerscot regardless of how much dividend is paid. Here the profits of Bowerscot are not changing, just the amount of dividend they are paying. 2. The answer is correct. The $20.52M is after deducting the withholding tax and so the gross dividend currently is $20.52/0.95 = $21.6M (or 60% x $36M). For Arthuro to receive an additional $12.148M the gross dividend would need to increase by $12.148/0.95 = $12.787. So the new total gross dividend will have to be 21.6 + 12.787 = $34.387

TTJRSupporter4y ago#2

thanks a lot, sir...

John MoffatTutor4y ago#3

You are welcome :-)

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