# Question

Suppose the tax rate is 0% for taxable income less than $ 0 (again no tax refunds for losses and no NOL carry back or carry forwards). For positive taxable income up to and including $ 25,000, the tax rate is 15%; for taxable income greater than $ 25,000 but less than $ 50,000, the tax rate is 25%; and for taxable income greater than $ 50,000, the tax rate is 34%. Calculate the expected tax payable for the following two projects. Explain and discuss your results.

a. 50% chance of $ 100,000 and a 50% chance of loss of $ 50,000

b. 50% chance of $ 75,000 and a 50% chance of loss of $ 25,000

a. 50% chance of $ 100,000 and a 50% chance of loss of $ 50,000

b. 50% chance of $ 75,000 and a 50% chance of loss of $ 25,000

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