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    Tax liability

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    Your corporation had the following cash flows last year:
    Operating income $2,500,000
    Interest received 100,000
    Interest paid 450,000
    Dividends received 200,000
    Dividends paid 500,000

    Your firms pays taxes at a rate of 40% (federal and state combined) and was profitable last year. Calculate the firm's corporate tax liability for last year.

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    Solution Preview

    Dividends paid are from after tax income and so have no effect on the tax liability.
    Dividends received - 70% of the dividend amount is ...

    Solution Summary

    The solution explains how to calculate the amount of tax liability