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2. (Tax Benefits of Charitable Contributions) A company earns before-tax profits of $100,000. It has agreed to contribute 10 percent of its after-tax profits to
2. (Tax Benefits of Charitable Contributions) A company earns before-tax profits of $100,000. It has agreed to contribute 10 percent of its after-tax profits to the Red Cross Relief Fund. It must pay a state tax of 5 percent of its profits (after the Red Cross donation) and a federal tax of 40 percent of its profits (after the donation and state taxes are paid). a. How much does the company pay in state taxes, federal taxes, Red Cross donations? What are the firm's after-tax and after-contribution profits? b. If the firm had not made the Red Cross donation, what would the after-tax profits be? c. Thus, what is the real cost of the Red Cross donation to the firm
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