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which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if th demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and aft

which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if th demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and aft

Essentials Of Investments
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
Problem 1PS
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A division of Midland Oil & Gas has a taxable income (TI) of $8.85 million for a tax year. If the state tax rate averages 6% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR. If Taxable Income ($) Is: But Not Of the Over over Тax Is Amount over 50,000 15% 50,000 75,000 7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900 + 34% 335,000 10,000,000 15,000,000 3,400,000 + 35% 10,000,000 15,000,000 18,333,333 5,150,000 + 38% 15,000,000 18,333,333 35% The equivalent after-tax ROR is determined to be %.
Transcribed Image Text:A division of Midland Oil & Gas has a taxable income (TI) of $8.85 million for a tax year. If the state tax rate averages 6% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR. If Taxable Income ($) Is: But Not Of the Over over Тax Is Amount over 50,000 15% 50,000 75,000 7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900 + 34% 335,000 10,000,000 15,000,000 3,400,000 + 35% 10,000,000 15,000,000 18,333,333 5,150,000 + 38% 15,000,000 18,333,333 35% The equivalent after-tax ROR is determined to be %.
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