Question: Suppose firms A and B have identical revenues and operating
Suppose firms A and B have identical revenues and operating expenses, so that each has earnings before amortization and taxes of exactly $1 million. Both firms will report amortization of $200,000 on their public financial statements. On its tax return, firm A claims $200,000 for CCA, whereas firm B is able to claim $400,000. Based on a tax rate of 30 percent of taxable income, how much tax will each firm pay?
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