Principles of Managerial Finance 15th Global Edition by Chad J. Zutter Test bank

                           82,500    to            157,500                              24
                         157,500     to             200,000                              32
                         200,000    to             500,000                              35
 
A) $157,500
B) $133,190
C) $94,500
D) $114,700
Answer:  B
Diff: 2
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
43) Prior to the Tax Cuts and Jobs Act, corporations faced a progressive tax rate schedule with rates ranging from 15% to 39%. Under that old tax law, a firm with taxable income of $100 million would have owed taxes of $35 million.  Under the Tax Cuts and Jobs Act, the corporate tax rate is a flat 21%. For a firm that makes $100 million in taxable income, the size of the tax reduction that the firm enjoys because of the new tax law is closest to ________.
A) $18 million
B) $21 million
C) $14 million
D) $35 million
Answer:  C
Diff: 2
Topic:  Ordinary Income
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 
44) Corporation A owns a small percentage of the stock of corporation B. Corporation B pays corporation A $100,000 in dividends. Corporation A pays tax at a 21% rate and is allowed to exclude from taxable income 50% of dividends received from other firms. The incremental taxes that Corporation A must pay on the dividends received are ________.
A) $21,000
B) $10,500
C) $0
D) $1,050
Answer:  B
Diff: 2
Topic:  Ordinary Income
Learning Obj.:  LG 4
Learning Outcome:  F-01
AACSB:  Analytical Thinking

45) Consider two firms, Go Debt corporation and No Debt corporation. Both firms are expected to have earnings before interest and taxes of $100,000 during the coming year. In addition, Go Debt is expected to incur $40,000 in interest expenses as a result of its borrowings whereas No Debt will incur no interest expense because it does not use debt financing. Both firms are in the 21 percent tax bracket. Calculate the earnings after tax for both firms. Compare the difference in after-tax earnings to the difference in interest expense. Can you reconcile that difference?
Answer: 

 
Go Debt has lower earnings after taxes compared to No Debt, and the difference is $31,600 ($79,000 - $47,400). The difference in interest expense is $40,000.  The recent the difference in earnings is less than the difference in interest expense is that the interest expense that Go Debt pays saves the company $8,400 in taxes (a number which you can calculate by multiplying 21% time the $40,000 interest expense).
Diff: 3
Topic:  Taxes
Learning Obj.:  LG 5
Learning Outcome:  F-01
AACSB:  Analytical Thinking
 

1.4   Developing skills for your career.
 
1) Communication skills are very important to financial and nonfinancial managers because ________.
A) they will be communicating with the investment community regularly
B) they work together in cross-functional teams and need to understand how members of their teams think
C) they will write reports that are disclosed in the firm's financial reports
D) they are all responsible for selling the firms goods and services to customers
Answer:  B
Diff: 1
Topic:  Developing skills for your career
Learning Obj.:  LG 1
Learning Outcome:  F-01
AACSB:  Reflective Thinking
2) Developing financial computing skills, such as expertise with software like Excel, is important because ________.
A) everyone in the firm must be an Excel expert to have success