Oceanic Technologies and Stratus Corp both has earnings before interest and taxes (EBIT) of $120 million and a marginal tax rate of 30%. Oceanic Technologies uses debt financing and has an interest expense of $15 million, while Stratus Corp has no debt and no interest expense. Compute the tax liability of both companies.
Oceanic Technologies and Stratus Corp both has earnings before interest and taxes (EBIT) of $120 million and a marginal tax rate of 30%. Oceanic Technologies uses debt financing and has an interest expense of $15 million, while Stratus Corp has no debt and no interest expense. Compute the tax liability of both companies.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter6: Accounting For Financial Management
Section: Chapter Questions
Problem 7P
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Question
Compute the tax liability of both companies on these financial accounting question
Transcribed Image Text:Oceanic Technologies and Stratus Corp both has earnings before interest
and taxes (EBIT) of $120 million and a marginal tax rate of 30%. Oceanic
Technologies uses debt financing and has an interest expense of $15
million, while Stratus Corp has no debt and no interest expense.
Compute the tax liability of both companies.
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