If Hemingway finances its expansion using cash reserves, what will be its new corporate tax liability and average tax rate? Tax liability $100,000 Average tax rate: 34.00% Tax liability Average tax rate: O Tax liability Average tax rate: O Tax liability Average tax rate: $119,000 39.00% $113,900 34.00% $119,000 34.00% Description Hemingway Corporation is considering expanding its operations to boost its income, but before making a final decision, it has asked you to calculate the corporate tax consequences of its decision. Currently, Hemingway generates before tax yearly income of $200,000 and has no debt outstanding Expanding operations would allow Hemingway to increase before tax yearly income to $350,000. Herningway can use either cash reserves or debt to finance its expansion. If Hemingway uses debt, it will have yearly interest expense of $70,000 The firm is subject to the following tax schedule: Range of taxable income Tax calculation + (Marginal rate * amount over base bracket) Base tax X amount over $ 0 7,500 + (15% 125 (34 X amount over X amount over (39 X amount over S 0 to $ 50,000 $ 50,000 to 75,000 75,000 100,000 100,000 to 335,000 335.000 10,000,000 10,000,000 to 15,000,000 15,000,000 to 18,333,333 Des 18,333,333 + (34 03 50,000) 75,000) 100,000) 335,000) 10,000,000) 15,000,000) 18,333,333) 13,750 22.250 113,900 3,400,000 5.150,000 6.416,667 amount over 35 X amount over + (38 amount over (35 X amount over