Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate

Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corpora 

Pear, an individual, plans to start a small business, which will operate as a corporation. In year 0, she expects the corporation to generate an ordinary loss of $1,850,000. Subsequently, she expects the corporation to be profitable, and projects ordinary profit of $2,775,000 in year 1, and $4,625,000 in year 2. Pear's personal marginal tax rate on ordinary income is 37 Assuming a corporate tax rate of 21% and a 10% discount rate, calculate the present value of expected tax costs on the business earnings for the first 3 years of operations if the business makes an S corporation election. Assume the excess business loss limitation does not apply. Round your discount rate calculations to three decimal places. O $1,745,475 $1,662,308 $978,835 $2,197,800

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Soluiom Cal culation of Preseud value of eubecte... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Engineering economy

Authors: Leland Blank, Anthony Tarquin

7th Edition

9781259027406, 0073376302, 1259027406, 978-0073376301

More Books

Students also viewed these Accounting questions

Question

What are three disadvantages of using the direct write-off method?

Answered: 1 week ago