Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Using the corporate tax rate schedule given in Table
2.1, perform the following:
a. Find the marginal tax rate for the following levels of
corporate earnings before taxes: $15,000; $60,000;
$90,000; $200,000; $400,000; $1 million; and $20
million.
b. Plot the marginal tax rates (measured on the y axis)
against the pretax income levels (measured on the x
axis). Explain the relationship between these
variables.
Table 2.1
Tax calculation
Range of taxable income
Base tax
(Marginal rate X amount over base bracket)
2$
0 to $
50,000
+
(15%
amount over
2$
0)
50,000 to
75,000
7,500
(25
amount over
50,000)
75,000 to
100,000
13,750
(34
amount over
75,000)
100,000 to
335,000
22,250
(39
amount over
100,000)
335,000 to
10,000,000
113,900
(34
amount over
335,000)
10,000,000 to
15,000,000
3,400,000
(35
amount over
10,000,000)
15,000,000 to
18,333,333
5,150,000
(38
amount over
15,000,000)
Over 18,333,333
6,416,667
(35
amount over
18,333,333)
二8:
+ + + + + t +
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