Hyundai is considering opening a plant in two neighboring states. Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit. Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit. Required: What is the after-state-taxes profit in the state with the 10% tax rate? What is the after-state-taxes profit in the state with the 2% tax rate? Which state should Hyundai choose?
Hyundai is considering opening a plant in two neighboring states. Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit. Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit. Required: What is the after-state-taxes profit in the state with the 10% tax rate? What is the after-state-taxes profit in the state with the 2% tax rate? Which state should Hyundai choose?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hyundai is considering opening a plant in two neighboring states.
Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit.
Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit.
Required:
- What is the after-state-taxes profit in the state with the 10% tax rate?
- What is the after-state-taxes profit in the state with the 2% tax rate?
- Which state should Hyundai choose?
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