A corporation has $7 million in equity. During the tax year it takes in $4 million in receipts and earns $2 million in capital gains from sale of a subsidiary. It incurs labor costs of $1 million, interest costs of $250,000, material costs of $500,000, and pays rent for structures of $250,000. Calculate the corporation's total accounting profit and, assuming that the profit is fully taxable, calculate its tax liability using the tax rates in Table 15.2. Calculate the ATR of the corporation as a percentage of its economic profit, assuming that the opportunity cost of capital is 8 percent.
Answer to relevant QuestionsExplain why interest payments by the federal government would still be a large share of federal expenditures even if the federal government does not run a deficit again for several years. Instead of using regulations to achieve the 20 percent reduction in emissions discussed in the preceding problem, suppose the EPA requires each of the five emitters to pay a fee of $450 for each ton of sulfur dioxide it ...A corporation has $5 million in assets and $3 million in debt. During the year it takes in $750,000 in net revenue after deduction of all costs except for interest and incurs interest expenses of $300,000. The corporation ...Your state has a retail sales tax of 10 percent but it exempts food, prescription drugs, and all services including housing services, repair services, and consumption of electricity and other public utility services. Use ...Go to Table 17.1 and find the property tax rate for the largest city in your state. Is that rate above or below the national average? If it is above the national average, what effect on property values is likely? If it is ...
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