Ch06: TaBS

Question 1

Expected EBT

Answer 1

[∑ EBT x Pr(success)] + [∑ NOL x Pr(success)]

the weighted average EBT

Question 2

Expected Taxes

Answer 2

(Expected EBT) x (t)
If the expected payoff is positive, multiply via the given tax-rate; if it’s negative, taxes don’t apply.

(Expected Taxes) should only be counted if:

(Expected Taxes) = [Expected EBT x Pr(success) x t] > 0

Question 3

Average Tax-rate, atr

Answer 3

(Expected Taxes-Payable) / (Expected positive EBT)