XYZ is evaluating a project that would require the purchase of a piece of equipment for $580,000 today. During year 1, the project is expected to have relevant revenue of $756,000, relevant costs of $199,000, and relevant depreciation of $136,000. XYZ would need to borrow $580,000 today to pay for the equipment and would need to make an interest payment of $30,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $322,000. What is the tax rate expected to be in year 1

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brucewayne9669 brucewayne9669

07-04-2022
Business

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XYZ is evaluating a project that would require the purchase of a piece of equipment for $580,000 today. During year 1, the project is expected to have relevant revenue of $756,000, relevant costs of $199,000, and relevant depreciation of $136,000. XYZ would need to borrow $580,000 today to pay for the equipment and would need to make an interest payment of $30,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $322,000. What is the tax rate expected to be in year 1

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anthougo anthougo · Answer 1 · 2022-04-13T13:13:42+02:00

The expected tax rate in Year 1 for XYZ Corporation for its project under evaluation, requiring the purchase of equipment for $580,000, is B) A rate equal to or greater than 5.00% but less than 14.00%.

What is the corporate tax rate?

The corporate tax rate in the United States is 21%. This is the proportion of the corporate taxable income that determines the tax liability.

However, based on the allowable expenses, including qualified interests that XYZ would pay for the purchase of the equipment, its effective tax rate may be reduced to between 5% and 14% because of tax-allowed deductions.

Answer Options:

A) A rate less than 5.00% or a rate equal to or greater than 41.00%.

B) A rate equal to or greater than 5.00% but less than 14.00%.

C) A rate equal to or greater than 14.00% but less than 23.00%.

D) A rate equal to or greater than 23.00% but less than 32.00%.

E) A rate equal to or greater than 32.00% but less than 41.00%.

Thus, the expected tax rate in year 1 is B) A rate equal to or greater than 5.00% but less than 14.00%.

Learn more about corporate tax rates at https://brainly.com/question/8677433