Please show the full steps!!! Thanks!!! Your medium sized company is contemplati
ID: 1090990 • Letter: P
Question
Please show the full steps!!! Thanks!!!
Your medium sized company is contemplating a major expansion by adding a new product line of plastic body panels for the automotive industry. Currently your company has a total taxable income of $3,000,000. The state tax for this income bracket is 10%. The costs and benefits associated with this major expansion are given below: The equipment for this project can be depreciated using a 7 year MACRS schedule. The annual revenue generated is $4,400,000. Federal Tax Rate = 34%Explanation / Answer
Calculation of tax rate:
Reference for calculations: - http://njaes.rutgers.edu/money/taxinfo/combining.asp
Effective State Bracket = (100% - Federal tax bracket) x State tax Bracket
= (100% - 34%) x 10%
= 66% x 10%
= 6.60%
Combined tax bracket = Federal tax bracket + Effective state bracket
= 34% + 6.60%
= 40.60%
Calculation of Before tax cash inflow per year = Annual revenue