A corporation has $7 mil. in equity. During the tax year it takes in $4 mil. in receipts and earns $ 2 million in capital gains from sale of subsidiary. It incurs labor costs of $1 mil., interest costs of $250,000, material costs of $500,000, and pays rent for structure of $250,000.
Calculate the corporation's total accounting profit and assuming that the profit is fully taxable, calculate its tax liability using the tax rates in this table:
Taxable income /ATR beg. of bracket /MTR
less than 50,000 / 0% / 15%
more than 50,000 but less than 75,00/ 15% / 25%
more than 75,000 but less than 10 million/ 18% / 34%
more than 10 mil. / 34% / 35%
Calculate the ATR (annual tax rate) of the corporation as a percentage of its economic profit, assuming that the opportunity cost of capital is 8%