- Suppose that firms face 40% income tax rate on all profits. In particular, losses receive full credit. 1 Firm A has 50% probability of a $1000 profit and a 50% probability of a $600 loss each year 32 Firm B has a 50% probability is a $300 profit and a 50% probability of a $100 profit each year. 33 a. What is the expected pre-tax profit next year for firms A and B? 34 b. What is the expected after-tac profit next year for firms A and B? 35 a)