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Calculation of Corporate Tax Liability

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Use the corporate income tax rate schedule in Table 2.6 of the chapter to calculate the tax liability for each of the following firms with the amounts of 2006 tax income noted.

a. Calculate, compare, and discuss the average tax rates for each of the firms during 2006.
b. Find the marginal tax rate for each of the firms at the end of 2006.
c. What relationship exists between the average and marginal tax rates for each firm?
d. What tax rate - average or marginal - is relevant to financial decisions for these
firms?

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