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Hyundai is considering opening a plant in two neighboring states. Option 1: One state has a corporate tax rate of 10 percent.Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performeDennis is currently considering investing in municipal bonds that earn 6.15 percent interest, or in taxable bonds issued by t

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Answer #1

a.After tax profit = Profit before tax(1-Tax rate)

= 1,100,000*(1-10%)

= $990,000

b.After tax profit = 1,060,000(1-2%) = $1,038,800

a.If sent in December = 32000(1-37%) = $20,160

In January = 32,000(1-37%) = 20,160

a.After tax return on taxable bond = 8.20%(1-22%) = 6.396%

Choose taxable bond

b.After tax return = 8.20%(1-32%) = 5.576%

Choose Municipal bond

c.Indifference tax rate = 8.20%(1-x) = 6.15%

1-x = 0.75

X = 25%

Hence, indifference tax rate = 25%

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