Pear, an individual, plans to start a small business, which will operate as a corporation. In...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $950,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $1,425,000 in year 1, and $2,375,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37%. Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business does not make an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. $853,623 $1,128,600 $896,325 $502,640 Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $950,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $1,425,000 in year 1, and $2,375,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37%. Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business does not make an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. $853,623 $1,128,600 $896,325 $502,640
Expert Answer:
Answer rating: 100% (QA)
As per given details please refer below answer Q1 Option 4 502640 i... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Assume that you are going to start a small business of your own. Describe the business and discuss the following: What costs you would incur? What competition you might experience How you would...
-
Mr. Erwins marginal tax rate on ordinary income is 37 percent. His $958,000 AGI included a $24,900 net long-term capital gain and $37,600 business income from a passive activity. a. Compute Mr....
-
Leona, whose marginal tax rate on ordinary income is 37 percent, owns 100 percent of the stock of Henley Corporation. This year, Henley generates $1 million of taxable income. a. If Henley wants to...
-
Find the magnitude of the reaction at A and the tension in cable CD using (a) the con- cepts of three-force bodies (closed polygon method discussed in chapter 2). (b) Check your answers by doing sum...
-
A manager of Varden Sporting Goods Company is considering accepting an order from an overseas customer. This customer has requested an order for 20,000 dozen golf balls at a price of $ 22 per dozen....
-
What are the differences between designing for AR and designing for VR?
-
What are the sequences, interdependencies, and relationships within SE Process Model?
-
A manager is trying to decide whether to build a small, medium, or large facility. Demand can be low, average, or high, with the estimated probabilities being 0.25, 0.40, and 0.35, respectively. A...
-
A third party support person can call a Technical Support Specialist on behalf of a registered user and receive technical support when they provide verifiable information on the registered user....
-
Lakey International is a foreign corporation that maintains its books of record in foreign currency (FC), although its functional currency is the U.S. dollar. Lakey originally began operations on...
-
Bear Stearns & Co Answer the following 10 questions, using the financial statement data from Blockbuster Entertainment Corporation. Show your work (i.e., note what numbers you're using). On May...
-
A market survey shows that 75 % of all households own a VCR. Suppose 100 households are surveyed. (a) What is the probability that none of the households surveyed owns a VCR? (b) What is the...
-
A soft drink producer has just installed a new assembly line. The assembly line is adjusted to dispense an average of 12.05 oz of soda into the 12-oz soda can with a standard deviation of .02. What...
-
Answer question 57 when d = .85. How does a change in the amount of decrease if the stock goes down affect the value of the call option? Question 57 You are given the following information about a...
-
A phone marketing company knows that the number of people who answer the phone between 10:00 and 10:15 a.m. has a Poisson distribution. The average number is eight. What is the probability that the...
-
A golfer enters a long-driving contest in which he wins if he drives the golf ball 300 yards or more and loses if he drives it less than 300 yards. Assume that every time he hits a golf ball, he has...
-
Raters who are low on conscientiousness and very agreeable tend to: Group of answer choices commit leniency error commit halo error be very accurate raters commit leniency error
-
A Alkynes can be made by dehydrohalogenation of vinylic halides in a reaction that is essentially an E2 process. In studying the stereochemistry of this elimination, it was found that...
-
For the last 2 years, The Health Company has experienced a fixed cost of $850,000 per year and an (r v) value of $1.25 per unit for its multivitamin line of products. International competition has...
-
In 2011, El Paso Water Utilities (EPWU) issued bonds worth $9.125 million to improve the Van Buren dam in central El Paso and to finance three other drainage projects. The bonds were purchased by the...
-
Multiple Choice Questions 1. In solving uniform series problems, n in the standard factor notation equation is equal to the number of arrows (i.e., cash flows) in the original cash flow diagram when:...
-
A construction contract differs from contracts that we generally deal with that focus on an easily defined physical object because the physical object can be examined. How is the object of a...
-
What does the owner contribute to the project and what does the contractor contribute to the project?
-
For what type of project is a line-of-balance schedule particularly suited? Identify specific examples.
Study smarter with the SolutionInn App