Suppose a firm has a tax loss of 5 million
Suppose a firm has a tax loss of $5 million in the current period. The firm’s after-tax discount rate is 10%. Over the preceding 5 years the firm has reported the following taxable income:
a. If the carryback period is 3 years, what is the firm’s marginal explicit tax rate in the current period?
b. If the carryback period is 2 years, what is the firm’s marginal explicit tax rate in the current period?
c. Suppose the carryback period is 2 years and taxable income in period −1 was only $1 million. What is the firm’s marginal explicit tax rate in the current period?
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