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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 21% 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)$16.8 million.
B)$56.0 million.
C)$31.5 million.
D)$9.45 million.

Question

Quizplus · Accepted Answer

Ford expects to earn pre-tax income of $80 million from operations next year. Ford pays a 21% tax rate on its pre-tax income. So, the amount that Ford Motor Company will owe in taxes next year without the launch of the new SUV is $80 million * 21% = $16.8 million.

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