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 $1,420,000 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 $1,380,000 of pretax profit. a. What is the after state taxes profit in the state with the 10% tax rate?

Question

Bentley Downs

Business

7 October, 16:25

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 $1,420,000 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 $1,380,000 of pretax profit. a. What is the after state taxes profit in the state with the 10% tax rate?

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Answers (1)

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Spencer Whitehead · Answer 1

It seems that something is missing in question i. e b) what is the after state taxes profit in the state with the 2% tax rate.

Answer for both requirement is given below in explanation with calculation.

Explanation:

A) After tax profit where state tax is 10%

The after tax profit will be 1,278,000$ (1420000*90%)

B) After tax profit where state tax is 2%

the after tax profit will be 1,352,400$ (1380000*98%)

So we can conclude that option 2 is better because it gives greater after tax profit.