Given the following tax rate schedule, what is the tax liability for a corporation with taxable income of $8 million?

Corporate Tax Rates Taxable Income

15% $0 - $50,000

25% $50,001 - $75,000

34% $75,001 - $10,000,000

35% over $10,000,000

Additional surtax of 5% on income between $100,000 and $335,000

Additional surtax of 3% on income between $15,000,000 and $18,333,333

a. $2,715,000

b. $2,720,000

c. $2,694,500

d. $2,708,250

The CEO of High Tech International decides to change an accounting method at the end of the current year. The change results in reported profits increasing by 5%, but the companys cash flows are not changed. If capital markets are efficient, then:

a. The stock price will increase due to higher profits.

b. The stock price will not be affected by the accounting change.

c. The stock price will decrease because accounting method changes are not permitted under generally accepted accounting principles.

d. The stock price will increase only if the accounting change will also result in higher profits in the next year.

The curse of competitive markets

a. May be lessened by obtaining patents for new ideas that protect companies from competitors.

b. Implies that profitable industries will become smaller as companies drop out to avoid competition.

c. Means that money spent on innovation is wasted because competitors will rush in and eliminate any excess profits.

d. Means that companies cannot earn exceptional profits.

Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit?

a. Return on equity.

b. The fixed asset turnover.

c. The operating profit margin.

d. The acid test ratio.

You deposit $4,500 per year at the end of each of the next 25 years into an account that pays 10% compounded annually. How much could you withdraw at the end of each of the 20 years following your last deposit if all withdrawals are the same dollar amount? (The twenty-fifth and last deposit is made at the beginning of the 20-year period. The first withdrawal is made at the end of the first year in the 20-year period.)

a. $51,983

b. $22,128

c. $45,987

d. $38,323

You are considering investing in a project with the following possible outcomes:

Probability of States Investments: Occurrence Returns

State 1: Economic boom 18% 20%

State 2: Economic growth 42% 16%

State 3: Economic decline 30% 3%

State 4: Depression 10% -25%

Calculate the expected rate of return and standard deviation of returns for this investment, respectively.

a. 2.18%, 1.69%

b. 8.72%, 12.99%

c. 7.35%, 12.99%

d. 3.50%, 1.69%