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18 August, 17:36

Suppose a firm's tax rate is 35%.

a. what effect would a $10.26 million operating expense have on this year's earnings?

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  1. 18 August, 17:41
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    A $10 million operating expense would be immediately expensed, increasing operating expenses by $10 million. This would lead to a reduction in taxes of $3.5 million. earnings would decline by $6.5 million. There would be no effect on next year's earnings.
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