Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The after-tax analysis for a $60,000 investment with associated gross income minus expenses (GI - E) is shown below for only the first 2 years. If the effective tax rate is 40%, the values for depreciation (D), taxable income (TI), and taxes for year 1 are closest to:
a. D = $5,000; TI = $25,000; Taxes = $10,000
b. D = $30,000; TI = $30,000; Taxes = $4000
c. D = $20,000; TI = $50,000; Taxes = $20,000
d. D = $20,000; TI = $10,000; Taxes = $4000
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