5) In 2008, XYZ company had $1,535,000 in revenues and $1,200,001 in expenses. A

Question

5) In 2008, XYZ company had $1,535,000 in revenues and $1,200,001 in expenses.
According to the Corporate Income Tax Table, what are the average and marginal tax rates
respectively? (round to nearest whole percent)

a) 30% average, 39% marginal
b) 34% average, 39% marginal
c) 21% average, 34% marginal
d) 23% average, 34% marginal

6) Following Problem 5. If the company doubled its revenues and expenses, how would its
respective average and marginal tax rates change?

a) Average rate increases, marginal rate increases
b) Average rate decreases, marginal rate decreases
c) Average rate decreases, marginal rate increases
d) Average rate does not change, marginal rate decreases

7) A proposed project that requires an investment of $13,278 (year 0) is expected to generate
a series of 4 equal annual net income of $6,000 each in constant dollars. Assuming the
average inflation rate of 3.5%, and the market interest rate of 10% during this inflationary
period, what is the equivalent net present worth (NPW) in actual dollars for this project?

a) $5,658
b) $7,380
c) $9,390
d) $7,277

8) A company purchased a commercial office for $210,000 ($150,000 for building and
$60,000 for land) on June 1st, 2010 and sold it on May 30th, 2013 for $240,000 ($145,000
for building and $95,000 for land). Their gains tax rate is 34%. How much gains taxes do
they owe?

a) $15,609
b) $19,833
c) $15,540
d) $14,014

9) Following Problem 8. Had the company purchased the property one day earlier and sold it
one day later, and all other information was the same, how much more gains taxes would it
have to pay?
a) $2,163
b) $109
c) $218
d) $305

Explanation / Answer

5) In 2008, XYZ company had $1,535,000 in revenues and $1,200,001 in expenses.
According to the Corporate Income Tax Table, what are the average and marginal tax rates
respectively? (round to nearest whole percent)

a) 30% average, 39% marginal
b) 34% average, 39% marginal
c) 21% average, 34% marginal
d) 23% average, 34% marginal

6) Following Problem 5. If the company doubled its revenues and expenses, how would its
respective average and marginal tax rates change?

a) Average rate increases, marginal rate increases
b) Average rate decreases, marginal rate decreases
c) Average rate decreases, marginal rate increases
d) Average rate does not change, marginal rate decreases

7) A proposed project that requires an investment of $13,278 (year 0) is expected to generate
a series of 4 equal annual net income of $6,000 each in constant dollars. Assuming the
average inflation rate of 3.5%, and the market interest rate of 10% during this inflationary
period, what is the equivalent net present worth (NPW) in actual dollars for this project?

a) $5,658
b) $7,380
c) $9,390
d) $7,277

8) A company purchased a commercial office for $210,000 ($150,000 for building and
$60,000 for land) on June 1st, 2010 and sold it on May 30th, 2013 for $240,000 ($145,000
for building and $95,000 for land). Their gains tax rate is 34%. How much gains taxes do
they owe?

a) $15,609
b) $19,833
c) $15,540
d) $14,014

9) Following Problem 8. Had the company purchased the property one day earlier and sold it
one day later, and all other information was the same, how much more gains taxes would it
have to pay?
a) $2,163
b) $109
c) $218
d) $305

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