Suppose a firm's tax rate is 25%. a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on next year's earnings? b. What effect would a $11.35 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.27 million per year for five years? What effect would it have on next year's earnings? a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13 million. This would lead to a reduction in taxes of 25% × $9.13 million = $2.28 million. B. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13 million. This would lead to an increase in taxes of 25% × $9.13 million = $2.28 million. C. Earnings would decline by $9.13 million-$2.28 million = $6.85 million. The same effect would be seen on next year's earnings. D. Earnings would decline by $9.13 million-$2.28 million = $6.85 million. There would be no effect on next year's earnings.
Suppose a firm's tax rate is 25%. a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on next year's earnings? b. What effect would a $11.35 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.27 million per year for five years? What effect would it have on next year's earnings? a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13 million. This would lead to a reduction in taxes of 25% × $9.13 million = $2.28 million. B. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13 million. This would lead to an increase in taxes of 25% × $9.13 million = $2.28 million. C. Earnings would decline by $9.13 million-$2.28 million = $6.85 million. The same effect would be seen on next year's earnings. D. Earnings would decline by $9.13 million-$2.28 million = $6.85 million. There would be no effect on next year's earnings.
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
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Suppose a firm's tax rate is 25%.
K
a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on
next year's earnings?
b. What effect would a $11.35 million capital expense have on this year's earnings if the capital expenditure is
depreciated at a rate of $2.27 million per year for five years? What effect would it have on next year's earnings?
a. What effect would a $9.13 million operating expense have on this year's earnings? What effect would it have on
next year's earnings? (Select all the choices that apply.)
A. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13
million. This would lead to a reduction in taxes of 25% x $9.13 million = $2.28 million.
B. A $9.13 million operating expense would be immediately expensed, increasing operating expenses by $9.13
million. This would lead to an increase in taxes of 25% x $9.13 million = $2.28 million.
C. Earnings would decline by $9.13 million - $2.28 million = $6.85 million. The same effect would be seen on
next year's earnings.
D. Earnings would decline by $9.13 million-$2.28 million = $6.85 million. There would be no effect on
next year's earnings.
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