Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $1,650,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $2,475,000 in year 1, and $4,125,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business makes an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. $1,556,775 $1,482,599 $1,960,200 $873.015
Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $1,650,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $2,475,000 in year 1, and $4,125,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business makes an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. $1,556,775 $1,482,599 $1,960,200 $873.015
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0,
she expects the corporation to generate an ordinary loss of $1,650,000. Subsequently, she expects
the corporation to be profitable, and projects ordinary profit of $2,475,000 in year 1, and
$4,125,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a
corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax
costs on the business earnings for the first 3 years of operations if the business makes an S
corporation election. Assume the excess business loss limitation does not apply. Round your
discount rate calculations to three decimal places.
$1,556,775
$1,482,599
$1,960,200
$873,015](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F160030f4-b03c-47b7-8a81-c792ff177a65%2F159e352e-4db3-4dbf-8830-387312d2c0be%2Frp53r6l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0,
she expects the corporation to generate an ordinary loss of $1,650,000. Subsequently, she expects
the corporation to be profitable, and projects ordinary profit of $2,475,000 in year 1, and
$4,125,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a
corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax
costs on the business earnings for the first 3 years of operations if the business makes an S
corporation election. Assume the excess business loss limitation does not apply. Round your
discount rate calculations to three decimal places.
$1,556,775
$1,482,599
$1,960,200
$873,015
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