Reference no: EM132512028

1) The Talley Corporation had taxable operating income of $420,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $70,000, (2) dividends received of $10,000, and (3) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt.

Question i: What is the firm's taxable income?

Question ii: What is the tax expense?

Question iii: What is the after-tax income?

2) The Wendt Corporation reported $70 million of taxable income. Its federal tax rate was 21% (ignore any possible state corporate taxes).

Question i: What is the company's federal income tax bill for the year? Enter your answer in dollars.

Question ii: Assume the firm receives an additional $4 million of interest income from some bonds it owns. What is the additional tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

Question iii: Now assume that Wendt does not receive the interest income but does receive an additional $4 million as dividends on some stock it owns. Recall that 50% of dividends received are tax exempt. What is the additional tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.