Question
The marginal tax rate of a firm is displayed as below: Taxable Income Tax rate $0 - $5 10% $5 - $10 20% $10+ 30%
The marginal tax rate of a firm is displayed as below:
Taxable Income Tax rate
$0 - $5 10%
$5 - $10 20%
$10+ 30%
A firm has its taxable income as the following:
Probability Pre-tax income
0.4 $10m
0.6 $30m
(1) Assume the company could purchase a zero-loading insurance policy. How much tax saving by purchasing the insurance policy?
(2) What if the insurance policy has a 30% loading?
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Essentials Of Investments
Authors: Zvi Bodie, Alex Kane, Alan Marcus
11th Edition
1260288390, 978-1260288391
