There was an error in the original version of the problem. This was not the fault of the individuals who submitted correct answers to that version so I have kept their shout-outs intact, but have updated the answers to be consistent with the current version of the problem.
| Solved! Shout-out to Mark Maenche! (Apr 6-2019, in 12 hrs, 47 mins after posting).
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- tax rate that makes the decision between liquidation and continued operations irrelevant: 37.0%
- ==> solve for tax: (invested capital - CoL) = (original pre-tax income) ⋅ (1 - tax) / (% CoC)
- ==> (292.5 - 30) = 50 ⋅ (1 - tax) / 0.12
- ==> tax = 37.0%
- pre-tax income that makes the decision between liquidation and continued operations irrelevant: 48.462
- = (invested capital - CoL) * CoC / (1 - %tax)
- = (292.5 - 30) * 0.12 / (1- %tax)
- = 48.462
| Honorable Mention! Chris B. (Apr 6-2019, in 19 hrs, 9 mins after posting).
|
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