The Bookbinder Company has made $220,000 before taxes during each of the last 15 years, and it expects to make $250,000 a year before taxes in the future. However, in 2011 the firm incurred a loss of $900,000.
The firm will claima tax credit at the time it files its 2012 income tax return, and it will receive a check from the U.S. Treasury.
Show how it calculates this credit, and the indicate the firm's tax liability for each of the next 5 years. Assume a 40% tax rate on all income to ease calculations.