Question

Binder Corp is subject to a 15% marginal tax rate. Clipper Corp is subject to a 21% marginal tax rate. Binder is the parent corporation of Clipper. They are jointly considering a $100,000 expenditure that will benefit both corporations. The after-tax cost of the expenditure is $ if Binder incurs the cost and $ if Clipper incurs the cost. According to this analysis, Corp should incur the cost.

Answer 1

The after-tax cost of the expenditure is $85,000 if Binder incurs the cost and $79,000 if Clipper incurs the cost. Binder Corp should incur the cost.

Step-by-step explanation:

The after-tax cost of the expenditure is $85,000 if Binder incurs the cost and $79,000 if Clipper incurs the cost. According to this analysis, Binder Corp should incur the cost.