If Home Depot has before-tax earnings of $7,000,000, Pays $2,400,000 i

If Home Depot has before-tax earnings of $7,000,000, Pays $2,400,000 in taxes, has no preferred stock, and a beta of 1.20, what is the firm’s current average tax rate?

A) 33.33%
B) 34.29%
C) 35.00%
D) 36.14%

ANSWER

B
Explanation: B) Current tax rate = taxes payable/before-tax earnings = $2,400,000/$7,000,000 = 34.29%.