Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 16AP
To determine
Determine the province in which Company E should build its new plant.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Hyundai is considering opening a plant in two neighboring states.
Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000
pretax profit.
Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000
of pretax profit.
a. What is the after state taxes profit in the state with the 10% tax rate?
After state taxes profit
b. What is the after state taxes profit in the state with the 2% tax rate?
After state taxes profit
Hyundai is considering opening a plant in two neighboring states.
Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit.
Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit.
Required:
What is the after-state-taxes profit in the state with the 10% tax rate?
What is the after-state-taxes profit in the state with the 2% tax rate?
Which state should Hyundai choose?
Davao has a potential foreign customer that has offered to buy 1,500 tons at P450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity?
Answer: 221,500
Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500?
Answer: 307.5
Chapter 4 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 4 - Prob. 1QPDCh. 4 - Mrs. K is about to begin a new business activity...Ch. 4 - Prob. 3QPDCh. 4 - On the basis of the discussion in this chapter and...Ch. 4 - Prob. 5QPDCh. 4 - Why do income shifts and deduction shifts usually...Ch. 4 - Prob. 7QPDCh. 4 - Prob. 8QPDCh. 4 - Prob. 9QPDCh. 4 - Prob. 10QPD
Ch. 4 - Identify the reasons why managers should evaluate...Ch. 4 - Prob. 12QPDCh. 4 - Prob. 13QPDCh. 4 - Prob. 14QPDCh. 4 - Using the 2019 corporate tax rate: a. What are the...Ch. 4 - Refer to the individual rate schedules in Appendix...Ch. 4 - Refer to the individual rate schedules in Appendix...Ch. 4 - Ms. JK recently made a gift to her 19-year-old...Ch. 4 - Firm A has a 21 percent marginal tax rate, and...Ch. 4 - Prob. 6APCh. 4 - Prob. 7APCh. 4 - Firm M and Firm N are related parties. For the...Ch. 4 - Company K has a 30 percent marginal tax rate and...Ch. 4 - Firm H has the opportunity to engage in a...Ch. 4 - What is the effect on the NPV of the restructured...Ch. 4 - French Corporation wishes to hire Leslie as a...Ch. 4 - Corporation R signed a contract to undertake a...Ch. 4 - Prob. 14APCh. 4 - Lardo Inc. plans to build a new manufacturing...Ch. 4 - Prob. 16APCh. 4 - Prob. 17APCh. 4 - Prob. 18APCh. 4 - Prob. 19APCh. 4 - Prob. 20APCh. 4 - Refer to the facts in the preceding problem. At...Ch. 4 - For each of the following scenarios, indicate...Ch. 4 - Assume that Congress amends the tax law to provide...Ch. 4 - Firm L has 500,000 to invest and is considering...Ch. 4 - Prob. 1IRPCh. 4 - Mr. and Mrs. K own rental property that generates...Ch. 4 - Prob. 3IRPCh. 4 - Prob. 4IRPCh. 4 - Prob. 5IRPCh. 4 - Prob. 6IRPCh. 4 - Prob. 7IRPCh. 4 - Firm HR is about to implement an aggressive...Ch. 4 - Prob. 1TPCCh. 4 - Prob. 2TPCCh. 4 - Prob. 3TPCCh. 4 - Ms. Z has decided to invest 75,000 in state bonds....
Knowledge Booster
Similar questions
- The Production Manager of Bright (USA) Inc., Ronnie Stewart provided information about the subsidiary’s annual fixed costs of $850,000. For a new product to be manufactured known as Robotec, its selling price will $8.50 with variable cost of $0.20. The combined state and federal tax rate currently is 30 percent.Ronnie is wondering on the number of units need to make and sell each year to earn an after-tax profit of $250,000.At the same time, Ronnie is facing a situation where he is considering 2 options:Option 1: To pay royalty to supplier Alpha of 10%.Option 2: To pay royalty of 6.5% to supplier Beta, but, in this option the variable cost will increase to $0.25.In both situations, Ronnie is clueless on the number of units the company must make and sell to generate $250,000 profit after taxes. For Robotec;(a) Calculate the number of units need to make and sell each year to earn an after-tax profit of $250,000.(b) Calculate number of units need to make and sell each year to earn an…arrow_forwardA component manufacturer currently produces 200,000 units a year. It buys component lids from an outside supplier at a price of $2 a lid. The plant manager believes that it would be cheaper to make these lids rather than buy them. Direct production costs are estimated to be only $1.50 a lid. The necessary machinery would cost $150,000 and would last 10 years. This investment could be written o§ immediately for tax purposes. The plant manager estimates that the operation would require additional working capital of $30,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. If the company pays tax at a rate of 21% and the opportunity cost of capital is 15%, would you support the plant managerís proposal? State clearly any additional assumptions that you need to make. i am looking for a new solution. thanksarrow_forwardLobby Company produces and sells its only product XT-300. The company has been approached by a new customer from the USA with an offer to purchase 15,000 units of XT-300 for $11.50 each. Selling to the US will not affect the company’s other customers, and existing sales would not be affected. Lobby normally produces 110,000 units per year but only plans to produce and sell 90,000 in the coming year. Exporting the product to the USA will require a further packaging cost of $0.30 per unit. The normal sales price is $16 per unit. Unit cost information for the normal level of activity is as follows: Direct materials $4.50 Direct labour 4.20 Variable overhead 1.65 Fixed overhead 2.00 Total $12.35 Required: A). What are the relevant costs and benefits of this special order? B). Will operating income increase or decrease if the order from this new customer is accepted – if so, by how much? C). Suppose the new customer wants to buy 25,000 units, should…arrow_forward
- DIY Sdn Bhd is a Malaysian tax resident company. DIY is involved in manufacturing bricks. DIY needs to know regarding sales tax implications in the manufacturing business. The company plans to import special high-grade stones and carry out a change in the nature and quality of the materials by glazing them before sale. DIY’s current sales is RM350,000 and is projected to be around RM400,000 for the next few years a(i) Explain whether DIY Sdn Bhd activities will fall within the scope of manufacturing activities for sales tax purposes. a(ii) Discuss on the sales tax registration requirement and advice whether DIY need to be registered.arrow_forwardLobby Company produces and sells its only product XT-300. The company has been approached by a new customer from the USA with an offer to purchase 15,000 units of XT-300 for $11.50 each. Selling to the US will not affect the company’s other customers, and existing sales would not be affected. Lobby normally produces 110,000 units per year but only plans to produce and sell 90,000 in the coming year. Exporting the product to the USA will require a further packaging cost of $0.30 per unit. The normal sales price is $16 per unit. Unit cost information for the normal level of activity is as follows: Direct materials $4.50 Direct labour 4.20 Variable overhead 1.65 Fixed overhead 2.00 Total $12.35 Required: C). Suppose the new customer wants to buy 25,000 units, should Lobby accept the offer? Show with calculations the effect on net incomearrow_forwardNational Restaurant Supply, Inc., sells restaurant equipment and supplies throughout most of the United States. Management is considering adding a machine that makes sorbet to its line of ice cream making machines. Management will negotiate the purchase price of the sorbet machine with its Swedish manufacturer. Management of National Restaurant Supply believes the sorbet machine can be sold to its customers in the United States for $4,950. At that price, annual sales of the sorbet machine should be 100 units. If the sorbet machine is added to National Restaurant Supply’s product lines, the company will have to invest $600,000 in inventories and special warehouse fixtures. The variable cost of selling the sorbet machines would be $650 per machine. Required: 1. If National Restaurant Supply requires a 15% return on investment (ROI), what is the maximum amount the company would be willing to pay the Swedish manufacturer for the sorbet machines? 2. The manager who is flying to Sweden…arrow_forward
- Lobby Company produces and sells its only product XT-300. The company has been approached by a new customer from the USA with an offer to purchase 15,000 units of XT-300 for $11.50 each. Selling to the US will not affect the company’s other customers, and existing sales would not be affected. Lobby normally produces 110,000 units per year but only plans to produce and sell 90,000 in the coming year. Exporting the product to the USA will require a further packaging cost of $0.30 per unit. The normal sales price is $16 per unit. Unit cost information for the normal level of activity is as follows: Direct materials $4.50 Direct labour 4.20 Variable overhead 1.65 Fixed overhead 2.00 Total $12.35 Required: A). What are the relevant costs and benefits of this special order? B). Will operating income increase or decrease if the order from this new customer is accepted – if so, by how much?arrow_forwardScrooge McDuck Safe Limited is considering buying the hinges it uses in the manufacture of vaults from an outside vendor. Currently, Scrooge McDuck Safe Limited makes the hinges in its own manufacturing facility. Scrooge McDuck Safe Limited can buy the hinges for $1.50 each. The company uses 900,000 hinges each year. Fixed cost for Scrooge McDuck Safe Limited would not change if the company stopped making the hinges. Information about Scrooge McDuck Safe Limited's cost to manufacture the 900,000 casters follows: Per Unit $.50 .10 Total Direct material $450,000 90,000 360,000 225.000 $1,125,000 Direct labor Variable overhead Fixed overhead Total .40 25 $1.25 Required: A. Prepare a relevant cost schedule that indicates whether Scrooge McDuck Safe Limited should buy the hinges or continue to make them. B. If Scrooge purchased the hinges, management has approached you that a dial producer wishes to rent the vacant space for $150,000 to produce their dials. Does this change your decision??…arrow_forwardThe Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B’s operating expenses are $10,000 during the month. How much will the combined profits of the two operations be in April 2021?arrow_forward
- The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2020, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B’s operating expenses are $10,000 during the month. Suppose the income tax rate in country A is 40% while in country B it is 20%. What will the combined profit be if all of the other numbers are the same as they were in the original assignment description? What would be the result in question 3 if the company decreased its transfer price to $90?arrow_forwardA company produces jackets for €20 each in Portugal, which has a corporate tax rate of 21%. It then transfers its products to its Irish subsidiary for resale to the Irish public at a sales price of €30 per jacket. The corporate tax rate in Ireland is 12.5%. Calculate the total after-tax profit in the two countries if the company uses a transfer price of €23 and it sells 10,000 jackets. ANSWERS: €84,950 €15,050 €66,500 €8,495 €8,750arrow_forwardToro Company is expanding its US-based plastic molding plant as it continues to transfer work from Juarez, Mexico contractors. The plant bought a $1.1 million precision injection molding machine to make plastic parts for Toro lawn mowers, trimmers, and snow blowers. The plant expects to hire 12 people, including some engineers for the expansion. If the average loaded cost (i.e., including benefits) of each employee is $100,000 per year, determine the annual worth of the new systems over a five-year planning period at an interest rate of 10% per year. Assume a 20% salvage value for the new equipment. $-2,436,420 $-2,539,420 $-1,454,142 $-1,973,420arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning