Suppose a firms tax rate is 35%. 1. What effect would a $10 million operating expense have
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Suppose a firm’s tax rate is 35%.
1. What effect would a $10 million operating expense have on this year’s earnings? What effect would it have on next year’s earnings?
2. What effect would a $10 million capital expense have on this year’s earnings, if the capital is depreciated at a rate of $2 million per year for 5 years? What effect would it have on next year’s earnings?
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