Assume That LoPine Ltd,a US-Based Company (Which Has a Classical

question 12

Multiple Choice

Assume that LoPine Ltd,a US-based company (which has a classical taxation system) ,borrows $10 million at an interest rate of 15 per cent and uses the funds to repurchase shares worth $10 million.Further,assume that the company tax rate is 35 per cent,the marginal income tax rate is 30 per cent and the average tax rate on equity income is 12 per cent.Calculate the net tax savings per year.

• A)$192 000
• B)$182 000
• C)$188 000
• D)$172 000

---

Definitions:

Rectification

The legal process of correcting errors in a document to reflect accurately the intentions of the parties involved.

Mistake

An error in understanding or judgment that may affect the validity of a contract.

Frustrated Contract

A contract that, through no fault of either party, has become impossible to perform, leading to its termination and relieving both parties from their obligations.

Breach of Contract

Occurs when one party fails to fulfill their obligations under the contract’s terms, allowing for legal action by the other party.