Compute the Tax Rates for the Three Taxpayers Shown in Table

question 28

Multiple Choice

Compute the tax rates for the three taxpayers shown in Table 33.1.Then use the table to answer the indicated question. $\begin{array}{|c|r|r|r|r|r|}\hline \text { Taxpayer } & \begin{array}{c}\text { Income } \\\text { (Dollars) }\end{array} & \begin{array}{c}\text { Taxable } \\\text { Income } \\\text { (Dollars) }\end{array} & \begin{array}{c}\text { Taxes Paid } \\\text { (Dollars) }\end{array} & \begin{array}{c}\text { Effective Tax } \\\text { Rate(Percent) }\end{array} & \begin{array}{c}\text { Nominal Tax } \\\text { Rate(Percent) }\end{array} \\\hline 1 & \$ 200,000 & \$ 100,000 & \$ 6,000 & \% & \% \\\hline 2 & 100,000 & 80,000 & 8,000 & \% & \% \\\hline 3 & 60,000 & 48,000 & 12,000 & \% & \% \\\hline\end{array}$
In Table 33.1,the nominal tax rate for taxpayer 3 is

• A)5.0 percent.
• B)12.5 percent.
• C)20.0 percent.
• D)25.0 percent.

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Definitions:

Straight-line Depreciation

A process for dividing the price of a tangible property into uniform yearly portions throughout its operational life.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered in depreciation calculations.

Payback Period

The length of time required to recover the cost of an investment or to reach a breakeven point.

Independent Project

A project whose acceptance or rejection does not directly affect the decision to undertake other projects.