A & K Co. expects to have earnings before taxes of $250,000 to $300,000. The company's marginal tax rate is 39% and its average tax rate about 33%. For every additional dollar A & K pays out in common dividends, its income tax liability will
A) increase by 39 cents.
B) fall by 39 cents.
C) be unaffected.
D) fall by about 33 cents.
Tax tables are based on ________ tax rates.
A) marginal
B) average
C) implied
D) investment
The marginal tax rate would equal the average tax rate for firms with earnings less than $50,000 or more than $18,333,333.
Answer: TRUE
The interest payments on corporate bonds are tax-deductible.
Answer: TRUE
A corporation's average tax rate will always be lower than or equal to its marginal tax rate.
Answer: TRUE
The highest marginal corporate tax rate is 35%.
Answer: FALSE
When analyzing the cash flows from a new project proposal, a company should always use its marginal tax rate.
Answer: TRUE
