11. LO.8 HippCo and HoppCo operate in the same industry and report the following tax rate reconciliations

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11. LO.8 HippCo and HoppCo operate in the same industry and report the following tax rate reconciliations in their tax footnotes.

HippCo HoppCo Hypothetical tax at U.S. statutory tax rate 21.0% 21.0%

State and local taxes 2.7 3.9 Municipal bond interest (12.5) (7.8)

Tax Court settlement on disputed tax issue 6.0 —

Effective tax rate 17.2% 17.1%

Compare and contrast the effective tax rates of these two companies.

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