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Compute tax cost of the additional income for mscs income

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Reference no: EM131548163

Assignment: Calculating Tax Cost

Microtech Software Corporation (MSC) was founded in 2001. The founder, Chan Li, studied at MIT and worked for a large software corporation before returning to his hometown, Centervale, to set up his own company.

The corporate tax rate structure applicable in Centervale is as follows:

  Taxable Income

Tax Rate

  Up to $50,000

15 percent

  From $50,001 through $150,000

22 percent

  Income in excess of $150,000

30 percent

MSC has an opportunity to invest in a project that is expected to generate an additional $55,000 of taxable income.

Compute the tax cost of this additional income for the following three scenarios:

• MSC's taxable income before the additional income is $45,000.
• MSC's taxable income before the additional income is $300,000.
• MSC has a loss of $5,000 before considering the additional income.

Show all the steps of the calculation and the final answer for each scenario. Compare the results for the three scenarios and comment on any differences.

Reference no: EM131548163

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