A Stationery Company Plans to Launch a New Type of Indelible

question 37

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 $8 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-rate of 35% on its pretax income, what effect will the advertising for the new pen have on its taxes?

• A) It will increase taxes by $8 million.
• B) It will increase taxes by $2.8 million.
• C) It will have no effect on taxes.
• D) It will reduce taxes by $2.8 million.

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Definitions:

Beta Blocker

A class of drugs that reduce blood pressure by blocking the effects of the hormone epinephrine, also known as adrenaline.

Anti-inflammatories

Substances or drugs that reduce inflammation or swelling in the body.

Medication Schedule

A plan that outlines the times and dosages at which a patient should take prescribed medications.

Hyperlipidemia

A condition characterized by unusually high levels of fats (lipids) in the blood, increasing the risk of heart disease.