Ford Motor Company is considering launching a new line of hybrid diesel-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 35% tax rate on its pre-tax income. The amount that Ford Motor Company owes in taxes next year without the launch of the new SUV is closest to ________.

Question

Quizplus · Accepted Answer

Without the new SUV, Ford's pre-tax income is $80 million. With a 35% tax rate, the tax owed is 0.35 * $80 million = $28.0 million.

Ford Motor Company Is Considering Launching a New Line of Hybrid