Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 2, Problem 17P

Suppose a firm’s tax rate is 35%.

  1. a. What effect would a $10 million operating expense have on this year’s earnings? What effect would it have on next year’s earnings?
  2. b. What effect would a $10 million capital expense have on this year’s earnings if the capital is depreciated at a rate of $2 million per year for five years? What effect would it have on next year’s earnings?
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Corporate Finance

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