Ashley expects her combined Federal and state marginal income tax rate to be 35% over the next three years before any profitsfrom the business are considered. Her after-tax cost of capital is 12%.Compute the present value of the future cash flows for 2015 to 2017 assuming that Ashley incorporates the business andpays all after-tax income as dividends (for Ashley's dividends that qualify for the 15% rate).1. Compute the present value of the future cash flows for 2015 to 2017 assuming that Ashley continues to operate thebusiness as a sole proprietorship.2. Should Ashley incorporate the business this year? Why or why not?3.
0.25 ptsQuestion 4Prob. 11. Mauve Supplies, Inc. reports total income of $120,000. The corporation’s taxable income is $105,000. What areMauve’s marginal, average and effective tax rates?
Quiz: Chapt 1 End of Chapter Problems...2 of 57/21/16, 8:04 AM