Use the Information for the Question(s)below

question 70

Multiple Choice

Use the information for the question(s) below.
Ford Motor Company is considering launching a new line of Plug-in Electric SUVs.The heavy advertising expenses associated with the new SUV launch would generate operating losses of $35 million next year.Without the new SUV,Ford expects to earn pre-tax income of $80 million from operations next year.Ford pays a 30% tax rate on its pre-tax income.
-The amount that Ford Motor Company will owe in taxes next year without the launch of the new SUV is closest to:

• A)$24.0 million
• B)$56.0 million
• C)$31.5 million
• D)$13.5 million

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Definitions:

Horizontal Equity

The principle that individuals with similar income or assets should be taxed at the same rate, reflecting fairness in tax policy.

Tax Policy

Refers to the principles and proposals governments use to design and implement taxes, affecting economic behavior, distribution of income, and fund public expenditures.

Income Quintile

A statistical measure dividing the population into five equal groups according to their income level to analyze economic inequality.

Lump-Sum Tax

A tax that is a fixed amount, not varying with the taxpayer’s income level or expenditure, making it independent of the taxpayer’s behavior.