Question 4 (2 points) Mr. Erske plans to invest $100,000 in one of the following three projects that have the same level of risk: Project 1 will generate a 9.0% before-tax return and be taxed at his 32% marginal tax rate. Project 2 will generate a 7.0% before-tax return and be taxed at a 15% preferential rate. Project 3 will generate a 6.5% before-tax return and is tax-exempt. Which investment should Mr. Erske select? Project 3 Project 2 Any of the three projects. Project 1 Question 5 (2 points) Rizzo Corporation sold a capital asset with a $692,000 book and tax basis for $650,000 cash. This was Rizzo's only asset sale during the year. If Rizzo has a 21% tax rate, the sale results in a: $42,000 favorable book-tax difference $33,180 favorable book-tax difference $33,180 unfavorable book-tax difference $42,000 unfavorable book-tax difference Previous Page Next Page Page 5 of 5 Sabo Question 6 (2 points) Pratt Company structured an income-generating transaction so that the recognition of $750,000 of taxable income and related cash flows is shifted to Pratt's 100% owned subsidiary, PTB Company. If Pratt's marginal tax rate is 21%, and PTB's marginal tax rate is 10%, what is the amount of tax savings that result from this income shift? $157,500 $75,000 $0 $82,500 $78,750 Prouin