You may use the following simplified corporate tax bracket to answer the following question:
You’re the Chief Operating Officer for Space X, and your current taxable corporate income is $24,000
You can undertake a project that will increase your taxable corporate income by $1,500
Explain your answers to the following questions thoroughly and be sure to address how the
$0 – $5,000 10% of the amount over $0
$5,000 – $20,000 $500 + 20% of the amount over $5,000
$20,000 – $25,000 $3,500 + 40% of the amount over $20,000
$25,000 and over 30% of the amount over $0
given tax code affects your choices
Do you undertake this project if you are able to finance the project without raising funds?
Now suppose that you need to raise the $500 through either debt or equity financing, and the
interest rate is 10%
Interest paid on loans is deductible, and you can claim a credit for dividend
Do you undertake the project? How do you finance it? Why?