Sea Harbor, Inc. has a marginal tax rate of 35 percent and anaverage tax rate of

Question

Sea Harbor, Inc. has a marginal tax rate of 35 percent and anaverage tax rate of 22 percent. If the firm earns $79,500 intaxable income, how much will it owe in taxes?

a. $10,335
b. $16,695
c. $17,490
d. $27,030
e. $27,825

A firm has earnings before interest and taxes of $77,960with a net income of $18,580. The taxes amounted to $21,310 for theyear. During the year, the firm paid out $60,000 to pay offexisting debt and then later borrowed an additional $125,000. Whatis the amount of the cash flow to creditors?

a. -$43,690
b. -$26,930
c. $56,650
d. $103,070
e. $121,650

Explanation / Answer

A marginal tax rate is the tax rate that applies tothe last dollar of the tax base (taxable income or spending and isoften applied to the change in one's tax obligation as incomerises: An average tax rate is the ratio of theamount of taxes paid to the tax base (taxable income orspending) so although the marginal rate is 35%.....the avg rate is22% is the percentagewe use on taxable income........ :
.22*79500=17490 :
Cashflow tocreditors =interest + change in LTD (long term debt) : interest payments - net new borrowing = interest payments -(ending long-term debt - beginning long-term debt) :
interest paid is figured by taking the amount 77960(beforetaxes and interest) and subtracting out taxes of 21310and net income of 18580....so interest paid is 77960-21310-18580=38070 : and payments out consisted of 38070+60000=98070 :
(98070)(to them)+125000(from them)=26930 net cash flow tothem or-26930 : answer is b)-26930 : answer is b)-26930

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.