Homework Answers
Domestic pre-tax profits = EBITDA - D&A - Interest expenses = 1000 - 200 - 300 = $ 500 M
Domestic taxes = Tax rate * pretax profits = 34% * 500 = 170 M
Foreign pre tax income = $ 100 M
Taxes = 24% * 100 = $ 24 M
tax credit = $ 20 M
Net tax paid = 24-20 = $ 4 M
Total taxes paid in domestic and foreign = 170 + 4 = $ 174 M
Total pretax income = 500 + 100 = 600 M
Effective tax rate = (Total taxes paid/ Total pre-tax income) = (174/600) = 29%
Answer is B) 29%
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