# (Solved Homework): Company J must choose between two alternate business expenditures. Expenditure 1 would require a \$30,000 cash outlay and Expenditure 2 r…

Company J must choose between two alternate business expenditures. Expenditure 1 would require a \$30,000 cash outlay and Expenditure 2 requires a \$28,500 cash outlay.

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is fully deductible and Expenditure 2 is nondeductible.

Don't use plagiarized sources. Get Your Custom Essay on
(Solved Homework): Company J must choose between two alternate business expenditures. Expenditure 1 would require a \$30,000 cash outlay and Expenditure 2 r…
Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT!

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is 50% deductible and Expenditure 2 is nondeductible.

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is fully deductible and Expenditure 2 is 50 percent deductible.

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is fully deductible and Expenditure 2 is nondeductible.

Above statement means that Expenditure 1 = 30000 shall be reduced by an amount of tax saving ( since fully deductible) but expenditure – 2 = 28500 is final. ( since no tax saved)

Let………… r = tax rate. To convert any expenditure to after tax by reducing tax saving, we will multiply that expenditure with (1 – r)

So ………….. 30000(1- r) = 28500

( 1 – r ) = 28500/30000 = 0.95

1 – r = 0.95 => …………r = 0.05

So Marginal tax rate must be 5%

Case – 2

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is 50% deductible and Expenditure 2 is nondeductible.

30000 ( 1 – 50%(r) ) = 28500

( 1 – 50%(r) ) = 28500/30000 = 0.95

– 50%(r) = 0.95 – 1 = – 0.05

0.50 * r = 0.05 ( negative cancelled on either sides)

r = 0.05 / 0.5 = 0.10 …………..(or) 10%

Thus marginal tax rate must be 10%

Case – 3

Determine the marginal tax rate at which the after-tax cash flows from the two expenditures are equal assuming that Expenditure 1 is fully deductible and Expenditure 2 is 50 percent deductible.

30000 ( 1 – r ) = 28500 ( 1 – 50%( r ) )

Expanding ………. 30000 – 30000*r = 28500 – 28500*50%*r

30000 * r – 14250 * r = 30000 – 28500

15750 * r = 1500

r = 1500/15750 = 0.0952 .(or) 9.52%

So Marginal tax rate must be 9.52%

Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

## Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.