Corporate Finance Question (Marginal/Average taxes)? - Freemason Hirams Travels Masonic Forums

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04-10-2008, 01:03 AM

Jeremy S

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Corporate Finance Question (Marginal/Average taxes)?

I'm stuck on a homework problem, I've been at it for a few hours now and I'm out of ideas. The closest thing I can come up with is 20% but I'm not positive on how to work this problem.

A firm currently has an average tax rate of 20% and a marginal tax rate of 25% based on its current taxale income of $36,000. What will the firm's average tax rate be if it increases its taxable income by $1,000?

a. 20%
b. 20.05%
c. 20.09%
d. 20.15%

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