Salinger Software was founded in 2008. The company lost money each of its first

Question

Salinger Software was founded in 2008. The company lost money each of its first three years, but was able to turn a profit in 2011. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year 2008 2009 2010 2011 EBIT $375,000,000 $150,000,000 $100,000,000 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry- forward provisions in the Tax Code, and assume that the current provisions were applicable in 2008. How much tax did the company pay in 2011? $%22,050,000 $26,250,000 O$32,812,500 O $31,762,500 O $19,687,500

Explanation / Answer

Ans $26,250,000

OPERATING INCOME IN 2011 700000000 LESS BOUGHT FORWARD LOSS ADJUSTED 2008 375000000 2009 150000000 2010 100000000 NET INCOME 75000000 TAX @ 35% ON NET INCOME 26250000

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