The Florida Citrus Corporation estimates its taxable income for next year at $2,500,000. The company is considering expanding its product line by introducing pineapple-orange juice for the next year. The market responses could be good, fair, or poor. Depending on the market response, the expected additional taxable incomes are (1) $2,000,000 for a good response, (2) $500,000 for a fair response, and (3) a $100,000 loss for a poor response.
(a) Determine the marginal tax rate applicable to each situation.
(b) Determine the average tax rate that results from each situation.