In 2016, Donald Trump is elected president under the platform that he will significantly reduce corporate income tax from 35%. Your tax manager would like to know what effect this might have on your Exxon tax liability. performa "what-if" analysis on different scenarios that might occur. below are the following three probabilities:

Scenario Statutory Tax rate Probability

#1 23% 10%

#2 21% 50%

#3 19% 40%

Answer the following.

• Collect historical information (2011 to 2015) on your company's earnings
• Formulate one-year ahead (i.e., 2017) earnings estimates for a bad-state, steady-state, and goodstate of the world
• Compute the expected impacts of the three tax scenarios (i.e., a total of nine scenarios should be computed), as well as the overall estimate based on the weighted probabilities.
• Provide a discussion of the overall expected effect of a reduction in the corporate statutory tax rate for your company. A careful analysis should consider, at a minimum, the expected impact on your company's tax liability, cash flows, and earnings. Also, include a discussion of how your determined the three earnings estimates.
• Provide the writing in a memo format.