Suppose a firms tax rate is 35%. a. What effect would a $10 million operating expense have

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Suppose a firm’s tax rate is 35%.

a. What effect would a $10 million operating expense have on this year’s earnings? What effect would it have on next year’s earnings?

b. What effect would a $10 million capital expense have on this year’s earnings, if the capital is depreciated at a rate of $2 million per year for five years? What effect would it have on next year’s earnings?

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Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

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Question Posted: Jan 14, 2012 02:04 AM

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Suppose a firms tax rate is 35%. a. What effect would a $10 million operating expense have

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Fundamentals of Corporate Finance

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