Salinger Software Was Founded in 2009

question 122

Multiple Choice

Salinger Software was founded in 2009. The company lost money each of its first three years, but was able to turn a profit in 2012. Salinger's operating income (EBIT) The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2009. How much tax did the company pay in 2012?

• A) $114,030,875
• B) $120,032,500
• C) $126,350,000
• D) $133,000,000
• E) $140,000,000

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Definitions:

Capital Investment Analysis

The process of evaluating and comparing potential investments or projects based on their expected returns and risks to choose the most beneficial.

Sunk Costs

Sunk costs refer to money that has already been spent and cannot be recovered, a concept that emphasizes that such costs should not affect future business decisions.

Federal Income Tax Ramifications

The effects or consequences that adjustments in the federal income tax laws or rates have on an individual or business's financial situation.

Capital Rationing

The process of limiting the amount of capital available for investment in order to ensure optimal returns on investment projects.