Suppose a firm's tax rate is 25%. 1. What effect would a $10.92 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to a reduction in taxes of 25%×$10.92 million=$2.73 million. B. A $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to an increase in taxes of 25%×$10.92 million=$2.73 million C. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. There would be no effect on next year's earnings. D. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. The same effect would be seen on next year's earnings 2. What effect would a $10.25 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.05 million per year for five years? What effect would it have on next year's earnings?
Suppose a firm's tax rate is 25%.
1. What effect would a $10.92 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.)
A. $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92
million. This would lead to a reduction in taxes of 25%×$10.92 million=$2.73 million.
B. A $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to an increase in taxes of 25%×$10.92 million=$2.73 million
C. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. There would be no effect on next year's earnings.
D. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. The same effect would be seen on next year's earnings
2. What effect would a $10.25 million capital expense have on this year's earnings if the capital expenditure is
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