Question
In: Finance
Suppose a firm's tax rate is 35%. a. What effect would a $9.85 million operating expense...
Suppose a firm's tax rate is 35%.
a. What effect would a $9.85 million operating expense have on this year's earnings? What effect would it have on next year's earnings?
b. What effect would a $9.25 million capital expense have on this year's earnings if the capital is depreciated at a rate of $1.85 million per year for five years? What effect would it have on next year's earnings?
Solutions
Expert Solution
AS NOTHING WAS MENTIONED ABOUT ROUNDING. FULL 4 DECIMALS ARE TAKEN
IF WE ROUND TO 2 DECIMALS, ANSWERS WILL BE
ANSWER a : (i) 6.40 (ii) NO EFFECT
ANSWER b : (i)1.20 (ii) 1.20
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