Suppose a C corporation has a tax loss of $5 million in the current period. The firms after-tax discount rate is 10%. Assume the firm is allowed to carry back losses. Over the preceding 5 years, the firm reported the following taxable income:

	Year
	-5	-4	-3	-2	-1	Current
Taxable income (loss) in millions	$1.0	$1.0	$1.5	$4.0	$3.0	-$5.0
Statutory tax rate (STR)	40%	40%	35%	35%	30%	30%

1. If the carryback period is 3 years, what is the firms MTR in the current period?
2. Suppose the carryback period is 2 years, carryforwards are allowed up to 5 years, taxable income in period -1 was only $500,000, and year T+1 (next year for carryforward) has $1M and a tax rate of 20%. What is the marginal tax rate in the current period?
3. Suppose the firm is prohibited from carryback losses but is allowed to carryforward losses up to 5 years. Additionally, assume that the tax rate will switch to 20% starting in year T+1 (next year) and continue at that rate for the foreseeable future. What is its marginal tax rate assuming it will earn $1 million in each of the next 5 years?