Module13HWSol - Module 13 Chapter 8 D2 Note that the rates...

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Module 13 Chapter 8 D2 Note that the rates are designed such a company that earns $350K will pay a flat tax rate of 34%. Federal tax = $350K(0.34) = $119K Effective tax rate = 0.34 + 0.1(1 0.34) = 0.406 = 40.6% D3 Note that the rates are designed such a company that earns $15M will pay 34% tax for the first $10M and 35% tax for the next $5M. Hence the amount of tax is $10M(0.34) + $5M(0.35) = $5.15M. Federal tax rate = 5.15M ÷ 15M = 0.343 = 34.3% Effective tax rate = 0.343 + 0.14(1 0.35) = 0.435= 43.5% D5 a) b) c) d) e) f) g)
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D13 The recovery period is 15 years. It follows from the MACRS depreciation schedule (Table 8.4 of textbook) that D1 = $30M(0.05) = $1.5M and B 1 = $30M - $1.5M = $28.5M. Proceeding in a similar fashion, we get Year (n) MACRS D n B n 1 5.00% $ 1,500,000 $ 28,500,000 2 9.50% $ 2,850,000 $ 25,650,000 3 8.55% $ 2,565,000 $ 23,085,000 4 7.70% $ 2,310,000 $ 20,775,000 5 6.93% $ 2,079,000 $ 18,696,000 6 6.23% $ 1,869,000 $ 16,827,000 7 5.90% $ 1,770,000 $ 15,057,000 8 5.90% $ 1,770,000 $ 13,287,000 9 5.91% $ 1,773,000 $ 11,514,000 10 5.90%
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Module13HWSol - Module 13 Chapter 8 D2 Note that the rates...

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