The correctly calculated taxes due on a corporate taxable income of $13,000,000

Question

The correctly calculated taxes due on a corporate taxable income of $13,000,000 are closest to which of the following?

An asset with 5-year MACRS life will be purchased for $20,000. It will produce net annaul benefits of $5,000 per year for 6 years, after which time it will have a net salvage value of zero and will be retired. The company's marginal tax rate is 35%. Complete the following after-tax cash flow table.

Enter your answer with 2 decimal places, as follow: 1000.00

EOY BTCF MACRS Depreciation Taxable Income Taxes ATCF 0 -20000.00 -20000.00 1 5000.00 Blank 1 1000.00 350.00 4650.00 2 5000.00 Blank 2 -1400.00 -490.00 5490.00 3 5000.00 3840.00 Blank 3 Blank 4 Blank 5 4 5000.00 2304.00 Blank 6 Blank 7 Blank 8 5 5000.00 Blank 9 Blank 10 Blank 11 Blank 12 6 5000.00 Blank 13 Blank 14 Blank 15 Blank 16

Explanation / Answer

For $13,000,000 we use the following tax table:

the corporate tax will be:

$3,000,000 x .35 + $9,665,000 x .34 + $235,000 x .39 + $25,000 x .34 + $25,000 x .25 + $50,000 x .15 = $4,450,000

The completed table is below. It uses MACRS with the 35% corporate tax rate

EOY BTCF MACRS Depreciation Taxable Income Taxes ATCF 0 -20000 -20000 1 5000 -4000 1000 350 4650 2 5000 -6400 -1400 -490 5490 3 5000 3840 1160 406 4594 4 5000 2304 2696 943.6 4056.4 5 5000 576 4424 1548.4 3451.6 6 5000 288 4712 1649.2 3350.8

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