Calculate taxable income and after-tax earnings

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Mr. Donald's and Burger Queen are two competitor firms in the fast food industry. Mr. Donald's had earnings before interest and taxes of $8,200,000 and Burger Queen had earnings before interest and taxes of $9,500,000. Mr. Donald's had $800,000 in interest income for the year, but no interest expense. Burger Queen had $800,000 in interest expense for the year, but no interest income.

a. Calculate taxable income and after-tax earnings for each of the companies using a 34% tax rate.

b. Which firm paid more taxes? Explain why.

Reference no: EM132620320

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