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Salinger Software was founded in 2005. The company lost money each of its first three years, but was able to turn a profit in 2008. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2005 -$50,000,000 2006 -$150,000,000 2007 -$100,000,000 2008 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2005. How much tax did the company pay in 2008?

Salinger Software was founded in 2005. The company lost money each of its first three years, but was able to turn a profit in 2008. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2005 -$50,000,000 2006 -$150,000,000 2007 -$100,000,000 2008 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2005. How much tax did the company pay in 2008?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Salinger Software was founded in 2005. The company lost money each of its first three years, but was able to turn a profit in 2008. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2005 -$50,000,000 2006 -$150,000,000 2007 -$100,000,000 2008 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2005. How much tax did the company pay in 2008?
Transcribed Image Text:Salinger Software was founded in 2005. The company lost money each of its first three years, but was able to turn a profit in 2008. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2005 -$50,000,000 2006 -$150,000,000 2007 -$100,000,000 2008 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2005. How much tax did the company pay in 2008?
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