Jones company earned $100,000 of pre-tax income in 1998, had $50,000 of pre-tax income in 1997, pays a 40% tax rate and has a dividend payout of 50%. What is the dividend amount declared by Jones Company in 1998?
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1998 Pre-tax income was $100,000 in 1998. The pre-tax income from the prior year has no relevance to the question. If the company pays a 40% tax rate, they are left with net income of $60,000 for the year. If the dividend payout rate is 50%, the company will declare $30,000 of dividends for 1998.