Question: Assume the firm s after tax cost of capital is 6
Assume the firm’s after tax cost of capital is 6% per annum. What is the benefit of deferring $ 1 of income for 1 year, for 2 years, and for 5 years assuming the firm’s marginal tax rate is 35%? Suppose the firm expects the top statutory tax rate to increase to 40% next year. Does it still pay to defer income for 1 year, for 2 years, or for 5 years? Explain and discuss your results.
Relevant QuestionsSuppose Sonics Inc. just started business this period. The firm purchased 400 units during the period at various prices as follows: The firm sold 250 units at $ 30 each on the following dates: Required (assume the firm faces ...Suppose you are a high tax bracket taxpayer. How could you take advantage of a situation in which the implicit tax rate on a tax exempt asset is different from the marginal tax rate on income from a fully taxable asset? What ...How difficult is it in reality to compute the corporation’s marginal tax rate? Why? What are the factors that are really important? If we observe that a firm has net operating losses, does this mean that the firm has not ...Suppose a firm has a tax loss in the current period of $10 million, which when added to prior tax losses gives it an NOL carry forward of $15 million. The top statutory tax rate for the foreseeable future is 35%. Assume an ...When evaluating new projects and investments, the ABC Corporation calculates after-tax cash flows and earnings assuming the firm’s marginal tax rate equals the top federal statutory tax rate of 35%. The firm is a large ...
Post your question