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Question 17 There Are Circumstances Under Which the Corporation Tax Is Equivalent

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Essay

Question 17
There are circumstances under which the corporation tax is equivalent to an economic profits tax.
-Return to Question 17 above.Suppose that we now know that the present value of depreciation allowances is 0.20.In addition,there is an investment tax credit of 0.10.How does this new information change your answer to Question 17? What effect does this new information have on the user cost of capital?


Definitions:

Import Demand Curve

A graphical representation showing the relationship between the price of an imported good and the quantity of the good that a country is willing to buy at those prices.

Domestic Price

The price of goods and services within a specific country, determined by local supply and demand conditions.

Export Supply Curve

A graphical representation showing how the quantity of goods a country exports changes in response to changes in the price of those goods.

Domestic Opportunity Cost

The cost of forgoing the best alternative use of resources within a country.

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