A division of Midland Oil & Gas has a taxable income (TI) of $9.45 million for a tax year. If the state tax rate averages 6% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR.
A division of Midland Oil & Gas has a taxable income (TI) of $9.45 million for a tax year. If the state tax rate averages 6% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A division of Midland Oil & Gas has a taxable income (TI) of $9.45 million for a tax year. If the state tax rate averages 6% for all states in
which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can
demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax
ROR.
If Taxable Income ($) Is:
But Not
Of the
Over
over
Tax Is
Amount over
50,000
15%
50,000
75,000
7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
100,000
335,000
22,250 + 39%
335,000
10,000,000
113,900 + 34%
10,000,000
15,000,000
3,400,000 + 35%
10,000,000
15,000,000
18,333,333
5,150,000 + 38%
15,000,000
18,333,333
35%
The equivalent after-tax ROR is determined to be
14 %.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5cd1477c-f923-4c34-b5fe-fb69f59a1462%2Ffa9ddb07-96d0-46b4-8dc2-f5e077cfaff5%2Fpzoer99_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A division of Midland Oil & Gas has a taxable income (TI) of $9.45 million for a tax year. If the state tax rate averages 6% for all states in
which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can
demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax
ROR.
If Taxable Income ($) Is:
But Not
Of the
Over
over
Tax Is
Amount over
50,000
15%
50,000
75,000
7,500 + 25%
50,000
75,000
100,000
13,750 + 34%
75,000
100,000
335,000
100,000
335,000
22,250 + 39%
335,000
10,000,000
113,900 + 34%
10,000,000
15,000,000
3,400,000 + 35%
10,000,000
15,000,000
18,333,333
5,150,000 + 38%
15,000,000
18,333,333
35%
The equivalent after-tax ROR is determined to be
14 %.
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