A Stationery Company Plans to Launch a New Type of Indelible

question 106

Multiple Choice

A stationery company plans to launch a new type of indelible ink pen.Advertising for the new product will be heavy and will cost the company $10 million,although the company expects general revenues of $280 million next year from sources other than sales of the new pen.If the company has a corporate tax of 40% on its pretax income,what effect will the advertising for the new pen have on its taxes?

• A)increase taxes by $10 million
• B)increase taxes by $4 million
• C)It will have no effect on taxes.
• D)reduce taxes by $4 million
• E)reduce taxes by $10 million

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