EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 2.A, Problem 1P
Summary Introduction
To determine: The tax bill of company I.
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Goose Industries faces the following tax schedule. Last year the company realized $15,000,000 in operating income (EBIT). Its annual interest expense is $7,500,000.
(1) Compute the company’s income taxes payable? Use the tax rate table below.
(2) What was the company’s net income for the year?
If a corporation's
taxable income is
It pays this
amount on the
base of the bracket
Plus this percentage
on the excess over the
base (marginal rate)
Average tax
rate at top
of bracket
Up to $50,000
$0
15%
15.0%
$50,000 – $75,000
$7,500
25%
18.3%
$75,000 – $100,000
$13,750
34%
22.3%
$100,000 – $335,000
$22,250
39%
34.0%
$335,000 – $10,000,000
$113,900
34%
34.0%
$10,000,000 – $15,000,000
$3,400,000
35%
34.3%
$15,000,000 – $18,333,333
$5,150,000
38%
35.0%
Over $18,333,333
$6,416,667
35%
35.0%
(1) $2,436,000 (2) $4,950,000
(1) $2,550,000 (2) $4,950,000
(1) $2,550,000 (2)…
The Wendt Corporation reported $45 million of taxable income. Its federal tax rate was 21% (ignore any possible state corporate taxes).
What is the company's federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
$
Assume the firm receives an additional $1 million of interest income from some bonds it owns. What is the additional tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
$
Now assume that Wendt does not receive the interest income but does receive an additional $1 million as dividends on some stock it owns. Recall that 50% of dividends received are tax exempt. What is the additional tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your…
In tax year 1, an electronics-packaging firm had a gross income of $33,000,000, $5,000,000 in salaries, $6,000,000 in wages, $1,000,000 in depreciation expenses, a loan principal payment of
$250,000, and a loan interest payment of $200,000. Determine the net income of the company in tax year 1. The corporate tax rate is 21%.
The net income of the company in tax year 1 is $
(Round to the nearest dollar.)
Chapter 2 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 2.A - Prob. 1QTDCh. 2.A - Prob. 2QTDCh. 2.A - Prob. 3QTDCh. 2.A - Prob. 1PCh. 2.A - Prob. 2PCh. 2.A - Prob. 3PCh. 2.A - Prob. 4PCh. 2.A - Prob. 5PCh. 2.A - Prob. 6PCh. 2.A - Prob. 7P
Ch. 2.A - Prob. 8PCh. 2 - Prob. 1QTDCh. 2 - Prob. 2QTDCh. 2 - Prob. 3QTDCh. 2 - Prob. 4QTDCh. 2 - Prob. 5QTDCh. 2 - Prob. 6QTDCh. 2 - Prob. 7QTDCh. 2 - Prob. 8QTDCh. 2 - Prob. 9QTDCh. 2 - Prob. 10QTDCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - Prob. 11PCh. 2 - Prob. 12PCh. 2 - Prob. 13P
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