Country M levies a 10 percent excise tax on the retail price of any automobile purchased in the

country. This year, the aggregate purchase price subject to tax was $6.7 million, so current year

revenue was $670,000. Country M plans to increase the tax rate next year to 11 percent.

Required:

a.

Compute next years excise tax revenue assuming next years tax base equals the current

year base.

b.

Compute next years excise tax revenue assuming next years tax base increases to $8.0

million.

c.

Compute next years excise tax revenue assuming next years tax base decreases to $5.7