Question

PLEASE EXPLAIN DETAILED STEPS WITH FNANCE CALCULATOR. THANKS

Suppose a firm earns $1,250,000 in taxable income. What are the firm's average tax rate? What is the firm's marginal tax rate?

(a) Average Tax rate 34%; Marginal Tax Rate 34%

(b) Average Tax rate 34%; Marginal Tax rate 39%

(c) Average Tax rate 39%; Marginal Tax rate 34%

(d) Average tax rate 28.5%; Marginal Tax Rate 34%

Answer 1

Answer: a). Avearge Tax rate 34%: Marginal Tax rate 34% Working Notes: Corporate tax rates Taxable Income Levels Tax Rate 50,001 S 75,001 S 100,001S 335,001 | $ 10,000,001 S 15,000,001 S 50.000| 1590 75.000| 25% 100,000| 3490 335.000 | 3990 10,000,000 | 3400 15.000.000| 3500 18.333.333| 38% 3590 18,333,333 above Firms Marginal Tax rate 3490 Caluclation of tax liabilitv on an income of S1,250,000 Diffrence in income Tax (A*B) Income SO $50,000 $50,000- $75,000 $75,000 S 100,000 $100,000 -S 335,000 S335,001 -$1,250,000 Rate 15%) $50.000 25%) $ 25,000 | $ 34%) $ 25,000 | $ 39%) $235,000 | $ 34%)$915,000 | $ S7,500 6,250 8,500 91,650 311,100 S425,000 Firm's average tax rate Tax Liability / Taxable Income * 100 S4,25,000 S1,250,000 100 34%