Question 6 (14 marks)

a) Assuming an imputation tax system, show the values for A, B, C and D below. Show all workings and attach a minus sign (-) to the value if it is a cash outflow. (4 marks)

Marginal tax rate	45%	19%
Corporate level
Net Profit Before Tax	$3	$3
Corporate tax (30%)	-$0.90	-$0.90
Net Profit After Tax	$2.10	$2.10
Shareholder level
Cash dividends	$2.10	$2.10
Gross-up adjustment
Grossed-up dividends	A	A
Personal Tax
Franking credit
Tax payable or refund	B	C
Dividend after taxes		D