Megan operates a housecleaning business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets the business, and provides supplies and equipment. The business has been generating net taxable profits of $58,000 per year, before considering the Section 199A deduction. As a sole proprietor, Megan qualifies for the 20 percent deduction, reducing taxable income from the business to $46,400.

a. Assume that Megan’s marginal tax rate on ordinary income is 35 percent and that she has no pressing need for cash flow from this business. Should Megan consider incorporating and operating the business through a C corporation? Provide calculations to support your conclusion. (Ignore any payroll or self-employment tax considerations.)

b. How would your conclusion in part a change if Megan’s marginal tax rate were only 28 percent?

The east asiatic company (eac), a danish company with subsidiaries throughout asia, has been funding its bangkok subsidiary primarily with u.s. dollar debt because of the cost and availability of dollar capital as opposed to thai baht-denominated (b) debt. the treasurer of eac-thailand is considering a 1-year bank loan for $247,000.the current spot rate is b32.03 /$, and the dollar-based interest is 6.78% for the 1-year period. 1-year loans are 12.04% in baht.a. assuming expected inflation rates of 4.3 % and 1.24% in thailand and the united states, respectively, for the coming year, according to purchase power parity, what would the effective cost of funds be in thai baht terms? b. if eac's foreign exchange advisers believe strongly that the thai government wants to push the value of the baht down against the dollar by5% over the coming year (to promote its export competitiveness in dollar markets), what might the effective cost of funds end up being in baht terms? c. if eac could borrow thai baht at 13% per annum, would this be cheaper than either part (a) or part (b) above?