7. The federal corporate income tax rate is 15%. The Ontario corporate income tax rate is 11.5%. The combined tax rate on corporate income in Ontario is t = 26.5%.
   1. Suppose that a firm has purchased a $10,000,000 capital asset financed with the sale of 10-year corporate bonds. The interest on the bonds is 6%. The capital asset is depreciated using straight line depreciation over a period of 10 years. The total amount the firm can deduct as an allowable business expense at the end of the first year is $ .
8. 2. The present value of all future depreciation allowances from the purchase of the $10,000,000 capital asset is $ . (It is necessary to show your calculations in the space provided )
9. 3. The present value of all future interest deductions from the purchase of the $10,000,000 capital asset is $ . (It is necessary to show your calculations in the space provided )
10. 4. The real opportunity cost to the firm from using bonds to purchase the $10,000,000 capital asset is $ .
11. 5. If the firm bought the $10,000,000 capital asset using retained earnings, the opportunity cost to the firm of the capital asset would be $ .
12. 6. If the corporate income tax were to tax economic profit instead of corporate income, the tax would have an excess burden equal to $ .
13. 7. One of the reasons for the federal income tax is that it is a withholding tax. Explain what the withholding function of the corporate income tax is. (type in the space provided)