# Question: Refer to the corporate marginal tax rate information in Table

Refer to the corporate marginal tax rate information in Table 2.3.

a. Why do you think the marginal tax rate jumps up from 34 percent to 39 percent at a taxable income of $100,001, and then falls back to a 34 percent marginal rate at a taxable income of $335,001?

b. Compute the average tax rate for a corporation with exactly $335,001 in taxable income. Does this confirm your explanation in part (a)? What is the average tax rate for a corporation with exactly $18,333,334? Is the same thing happening here?

c. The 39 percent and 38 percent tax rates both represent what is called a tax “bubble.” Suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $200,000. What would the new 39 percent bubble rate have to be?

Use the following information for Taco Swell, Inc., for Problems 25 and 26 ( assume the tax rate is 34 percent):

a. Why do you think the marginal tax rate jumps up from 34 percent to 39 percent at a taxable income of $100,001, and then falls back to a 34 percent marginal rate at a taxable income of $335,001?

b. Compute the average tax rate for a corporation with exactly $335,001 in taxable income. Does this confirm your explanation in part (a)? What is the average tax rate for a corporation with exactly $18,333,334? Is the same thing happening here?

c. The 39 percent and 38 percent tax rates both represent what is called a tax “bubble.” Suppose the government wanted to lower the upper threshold of the 39 percent marginal tax bracket from $335,000 to $200,000. What would the new 39 percent bubble rate have to be?

Use the following information for Taco Swell, Inc., for Problems 25 and 26 ( assume the tax rate is 34 percent):

## Answer to relevant Questions

Draw up an income statement and balance sheet for this company for 2010 and 2011.Diamond Eyes, Inc., has sales of $18 million, total assets of $15.6 million, and total debt of $6.3 million. If the profit margin is 8 percent, what is net income? What is ROA? What is ROE?Based only on the following information for Shinoda Corp., did cash go up or down? By how much? Classify each event as a source or use of cash.Decrease in inventory........ $430Decrease in accounts payable..... 165Increase ...A company has net income of $179,000, a profit margin of 8.3 percent, and an accounts receivable balance of $118,370. Assuming 70 percent of sales are on credit, what is the company’s days’ sales in receivables?Prepare the 2012 statement of cash flows for Smolira Golf Corp.Post your question