Exhibit 18.6 presents two approaches for estimating operating taxes. Use both methods to determine the operating taxes for ToyCo in year 3. What are ToyCos statutory rate, effective tax rate, and operating tax rate (under both approaches)?

402 TAXES EXHIBIT 18.6 Simple Approach for Estimating Operating Taxes $ million Panel B Panel A Assumption: Nonoperating items recognized domestically Statutory tax rate, % Assumption: Nonoperating items recognized globally Blended global rate, %1 EBITA Statutory taxes on EBITA 35.0 2,500.0x EBITA 29.7 2,500.0 743 875.0 Global taxes on EBITA Foreign-income adjustment R&D tax credit Estimated operating taxes (82) (40) 753 40) 702 R&D tax credit Estimated operating taxes Estimated operating tax rate, % 28.1 30.1 Estimated operating tax rate, % 1 Blended global rate equals 35.0% statutory rate minus 5.3% from the foreign-income adjustment 402 TAXES EXHIBIT 18.6 Simple Approach for Estimating Operating Taxes $ million Panel B Panel A Assumption: Nonoperating items recognized domestically Statutory tax rate, % Assumption: Nonoperating items recognized globally Blended global rate, %1 EBITA Statutory taxes on EBITA 35.0 2,500.0x EBITA 29.7 2,500.0 743 875.0 Global taxes on EBITA Foreign-income adjustment R&D tax credit Estimated operating taxes (82) (40) 753 40) 702 R&D tax credit Estimated operating taxes Estimated operating tax rate, % 28.1 30.1 Estimated operating tax rate, % 1 Blended global rate equals 35.0% statutory rate minus 5.3% from the foreign-income adjustment