Inky Inc. reported the following financial information in 2006. Operating income (EBIT) .......$650,000 Interest ..............$430,000 Dividends from

Question:

Inky Inc. reported the following financial information in 2006.
Operating income (EBIT) .......$650,000
Interest ..............$430,000
Dividends from Printers Inc. not included in operating
Income (Inky owns 3% of Printers) .....$ 20,000
Dividends paid to Inky’s stockholders .....$ 50,000
a. What is Inky’s tax liability? (Use the corporate tax schedule on page 48.)
b. What is Inky’s marginal tax rate?
c. What is Inky’s average tax rate?
d. Explain why only one of the rates in b and c is relevant for financial decisions?