Using the tax rate schedule given in Table 1.2, per- P1-7 Marginal and average tax rates form the following: a. Calculate the tax liability, after-tax earnings, and average tax rates for the fol- lowing levels of partnership earnings before taxes: $500,000; $1 million; $1.5 million; and $2 million. b. Plot the average tax rates (measured on the y-axis) against the pretax income lev- els (measured on the x-axis). What generalization can be made concerning the relationship between these variables? $10,000; $80,000; $300,000; T ONE Introduction to Managerial Finance 2018 Tax Rate Schedule for Single Taxpayer TABLE 1.2 Tax calculation (Marginal rate X amount over bracket + lower limit) Base tax Taxable income brackets $ 0 $ 9,525 $ $ 0) 0 (10% X amount over to $ 9,525) $ 38,700) $ 82,500) 38,700 $ (12% X amount over 9,525 953 + to $ 4,454 38,700 82,500 (22% X amount over + to $14,090 (24% X amount over 82,500 157,500 to $ 32,090 (32% X amount over 157,500 $157,500) 200,000 to 200,000 $ 45,690 (35% X amount over $200,000) 500,000 to Over 500,000 $150,690 (37% X amount over $500,000) corporate executives and “outside” or “independent” directors

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