8 Google Inc. (Statutory Tax Rate Reconciliation): Use the information in Exhibit P3.4 for Google Inc. and discuss the components of its statutory income tax rate reconciliation for Years 2 and 3. For each year, calcu- late Google's effective tax rate and the marginal tax rate for its interest tax shields. Also discuss the tax rates you would use in forecasting Google's after-tax earnings and interest tax shields for income and interest in the United States. Also using just the Federal statutory tax rate line and the foreign rate differential line, what is your estimate of the tax rate paid on foreign income if 50% of their income is from outside the United States. EXHIBIT P3.4 Statutory Income Tax Rate Reconciliation for Google Google Inc. Year 2 Year 3 (s in millions) Federal statutory tax rate (35%). State taxes, net of federal benefit Stock-based compensation expense Change in valuation allowance Foreign rate differential. Federal research credit, Tax exempt interest Other permanent differences Provision for income taxes. $2,933 302 63 -41 -1,339 -56 $2,049 263 91 313 -1.020 -52 -15 -52 14 34 $1,861 $1.626 $1,626 8 Google Inc. (Statutory Tax Rate Reconciliation): Use the information in Exhibit P3.4 for Google Inc. and discuss the components of its statutory income tax rate reconciliation for Years 2 and 3. For each year, calcu- late Google's effective tax rate and the marginal tax rate for its interest tax shields. Also discuss the tax rates you would use in forecasting Google's after-tax earnings and interest tax shields for income and interest in the United States. Also using just the Federal statutory tax rate line and the foreign rate differential line, what is your estimate of the tax rate paid on foreign income if 50% of their income is from outside the United States. EXHIBIT P3.4 Statutory Income Tax Rate Reconciliation for Google Google Inc. Year 2 Year 3 (s in millions) Federal statutory tax rate (35%). State taxes, net of federal benefit Stock-based compensation expense Change in valuation allowance Foreign rate differential. Federal research credit, Tax exempt interest Other permanent differences Provision for income taxes. $2,933 302 63 -41 -1,339 -56 $2,049 263 91 313 -1.020 -52 -15 -52 14 34 $1,861 $1.626 $1,626