Question: A new tax is levied on airline profits to finance
A new tax is levied on airline profits to finance improvements in the nation's airports. The current market rate of interest is 8 percent. However, airline profits are subject to a 50 percent tax. A cost-benefit analysis calculates the percent return to the investment in new air facilities to be 12 percent. Will net benefits from resource use increase as a result of construction of new air travel facilities?
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