Problem: Williams Inc reports total net income of $130,000 during 2012. This includes $10,000 of income from 5.5% Orange County municipal bonds. Thus the Corporation's taxable income is equal to $120,000.
1) What is William's tax liability for 2012?
2) What are William's marginal, average and effective tax rates, respectively?
3) If equivalent taxable bonds pay 7.5% interest, what is the implicit rate for the Orange County bonds?
4) Did Williams make a good choice to invest in the municipal bonds instead of the taxable bonds?