Factor of (1-Tax Rate) problems, factor, having, other, place

jlg1982

Hi,

I am having problems understanding (1-Tax Rate) factor when calculating dilutive EPS - debt and in other place used. Can anyone explain its significance.

Wasteoftime

why isnt the same factor applied to common stock and preffered stock. Arent they taxed on gains



Edited 1 time(s). Last edit at Wednesday, May 12, 2010 at 09:19PM by bigspydee.

hariRaj

We are talking about payments made to HOLDERS of stocks, preferred stock and debt.

Payments made to debtholders i.e. interest is recognized on the income statement so it lowers income before tax and provides the tax shield.

Payments made to ordinary and preferred shareholders i.e. dividends are not listed on the income statement; they're listed in the statement of changes to equity.

Bigspydee: You're thinking of investments in common and preferred stock, not issuance of these securities.