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Business, 05.02.2021 22:50 soyymiilk

Firm M and Firm N are related parties. For the past several years, Firm M’s marginal tax rate has been 34 percent and Firm N’s marginal tax rate has been 25 percent. Firm M is evaluating a transaction that will generate $10,000 income in each of the next three years. Firm M could restructure the transaction so that the income would shift to Firm N. Because of the restructuring, the annual income would decrease to $9,000. Based on these facts, should Firm M restructure the transaction? Calculate the after-tax profit for both Firm M and Firm N for one year only. It is not necessary to do a present value calculation.

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Firm M and Firm N are related parties. For the past several years, Firm M’s marginal tax rate has be...
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