Question

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.


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  • CreatedAugust 22, 2015
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