Question

TenTec in Sevierville, TN makes commercial and amateur radio equipment including receivers, transceivers, antenna tuners, linear amplifiers, etc. Their taxable income last year was $720,000. They have established a new line of electronic equipment that is on sale this year, and expected to add another $140,000 to taxable income. Show your calculations to get credit.

Show equation for Year 1 and 0 and fill in table please. Thanks!

a. Determine the effective (average) tax rate on all of last year’s taxable income.

b. Determine the effective (average) tax rate on all of this year’s taxable income.

c. Determine the incremental tax rate.

d. Determine the marginal tax rate this year.

Answer 1