16. Suppose that firms face a 40% income tax rate on all profits. In particular, losses receive full credit. Firm A has a 50% probability of a \($1000\) profit and a 50%

probability of a \($600\) loss each year. Firm B has a 50% probability of a \($300\) profit and a 50% probability of a \($100\) profit each year.

a. What is the expected pre-tax profit next year for firms A and B?

b. What is the expected after-tax profit next year for firms A and B?