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AKTR company earns a $10 profit on each unit of manufactured good, and sells $20 million units each year. KTR's income tax rate is 20%.
AKTR company earns a $10 profit on each unit of manufactured good, and sells $20 million units each year. KTR's income tax rate is 20%. However, the tax rate recently increased to 22%. KTR's owners are considering two alternatives. They could simply accept the $4 million tax increase as a reduction in their after- tax profit, or they could raise the price of each unit by 20 cents, thereby increasing the profit per unit to $10.20. However, the marketing department estimates that the price increase would reduce annual sales to 19 million units. Which alternative is better for KTR'S owners
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