The Talley Corporation had a taxable income of $335,000 from operations after al

Question

The Talley Corporation had a taxable income of $335,000 from operations after all operating costs but before: (1) interest charges of $33,500, (2) dividends received of $13,400, (3) dividends paid of $16,750, and (4) income taxes. What are the firm's income tax liability and its after-tax income? Round your answers to two decimal places. Income tax liability $ After-tax income $ What are the company's marginal and average tax rates on taxable income? Round your answers to two decimal places. Marginal tax rate % Average tax rate %

Explanation / Answer

Taxable income =                                             $335,000

Interest charges =                                          -$ 33,500

Dividends received = $13,400 x 0.03 =       $ 4,020

                                                                        -------------

= $305,520

Income tax liability= 22,250 + (305,520 – 100,000)x0.39

                                 =22,250 +(205,520) x 0.39

                                = 22,250+ 80,152.80

                                =$102,402.80

After-tax income= $305,520 - $102,402.8 + 13,400x0.7

                               =305,520-102,402.8 +9,380

                              = $193,737.20

The company’s marginal tax rate = 39%

Average tax rates on taxable income = $102,402.80/$305,520 = 33.52%

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