A stationery company plans to launch a new type of indelible ink pen. Advertising for the new product will be heavy and will cos
t the company $ 12 million, although the company expects general revenues of $280 million next year from sources other than sales of the new pen. If the company has a corporate tax-rate of 40% on its pretax income, what effect will the advertising for the new pen have on its taxes?
Expected to generate revenues next year = $280 million
Corporate tax rate = 40%
Based on the above information, the effect would be
The cost to the company is treated as an expense and therefore it is deducted from the revenue. Moreover, there is a reduction of $4.8 million i.e come from
