Hyundai is considering opening a plant in two neighboring states.

Option 1:

One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,015,000 pretax profit.

Option 2:

The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $960,000 of pretax profit.

a. What is the after state taxes profit in the state with the 10% tax rate?

Afeter state tax profit?

b.

What is the after state taxes profit in the state with the 2% tax rate?

After state taxes profit?

Question

Sabrina Frye

Business

26 September, 23:55

Hyundai is considering opening a plant in two neighboring states.

Option 1:

One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,015,000 pretax profit.

Option 2:

The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $960,000 of pretax profit.

a. What is the after state taxes profit in the state with the 10% tax rate?

Afeter state tax profit?

b.

What is the after state taxes profit in the state with the 2% tax rate?

After state taxes profit?

+1

Answers (1)

Know the Answer?

Bruce Burke · Answer 1

a. What is the after state taxes profit in the state with the 10% tax rate?

after state tax profit = $1,015,000 x (1 - state tax rate) = $1,015,000 x 0.90 = $913,500

b. What is the after state taxes profit in the state with the 2% tax rate?

after state tax profit = $960,000 x (1 - state tax rate) = $960,000 x 0.98 = $940,800

Unlike federal corporate taxes which apply to all US corporations regardless of where they operate, state corporate taxes vary a lot depending on the state. Some states do not collect any tax at all (6 states) while others charge taxes that vary from 2.5% to 12%.