ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Problem 17.047
A division of Midland Oil & Gas has a taxable income (TI) of $9.35 million for a tax year. If the state tax rate averages 7% for all
states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified
only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax
rate Te and after-tax ROR.
If Taxable Income ($) Is:
Over
But Not
over
Tax Is
Of the
Amount over
0
50,000
15%
0
50,000
75,000
7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
22,250 + 39%
100,000
335,000
10,000,000
113,900+34%
335,000
10,000,000
15,000,000
3,400,000+ 35%
10,000,000
15,000,000
18,333,333
5,150,000+38%
15,000,000
18,333,333
35%
0
The equivalent after-tax ROR is determined to be
%.
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Transcribed Image Text:Problem 17.047 A division of Midland Oil & Gas has a taxable income (TI) of $9.35 million for a tax year. If the state tax rate averages 7% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR. If Taxable Income ($) Is: Over But Not over Tax Is Of the Amount over 0 50,000 15% 0 50,000 75,000 7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900+34% 335,000 10,000,000 15,000,000 3,400,000+ 35% 10,000,000 15,000,000 18,333,333 5,150,000+38% 15,000,000 18,333,333 35% 0 The equivalent after-tax ROR is determined to be %.
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