Problem
Corporate Tax Liability
"The Talley Corporation had taxable operating income of $450,000 (i.e., earnings from operating revenues minus all operating costs)." Talley also had {i) interest charges of $40,000, (ii} dividends received of $10,000, and (iii) dividends paid of $25,000. Its federal tax rate was 21% (ignore any possible state corporate taxes}. Recall that 50% of dividends received are tax exempt.
a) What is the firm's taxable income?
b) What is the tax expense?
c) What is the after-tax income?