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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 Summary

The solution explains how to calculate the amount of tax liability

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

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