The Talley Corporation had a taxable income of $335,000 from operations after all operating costs but before (1) interest charges of $67,000

The Talley Corporation had a taxable income of $335,000 from operations after all operating costs but before (1) interest charges of $67,000, (2) dividends received of $16,750, (3) dividends paid of $20,100, and (4) income taxes.

What are the firm's income tax liability and its after-tax income? Round your answers to two decimal places.

Income tax liability	$
After-tax income	$

What are the company's marginal and average tax rates on taxable income? Round your answers to two decimal places.

Marginal tax rate	39%
Average tax rate	%

Solutions

Expert Solution

1.Income after operating costs: $335,000

Less: Interest expense -$67,000

Add: Dividends received (only

30% of the dividends are taxable) $5,025

Taxable income. $273,025

2.Since $273,025 falls under the $100,000 to $335,000 tax bracket,

the tax would be: $22,250 + 0.39*($273,025 - $100,000)

= $22,250 + $67,479.75

= $89,729.75.

3.Marginal tax rate = 39%

Average tax rate = $89,729.75 / $273,025

= 0.3287*100

= 32.87%.

jeff jeffy answered 2 years ago

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