McGraw-Hill's Taxation of Individuals 3rd Edition by Brian Spilker,Benjamin Ayers,John Robinson,Edmund Outslay ,Ronald Worsham,John Barrick,Connie Weaver

Exercise 15

Hyundai is considering opening a plant in two neighboring states.One state has a corporate tax rate of 10 percent.If operated in this state, the plant is expected to generate $1,000,000 pretax profit.The other state has a corporate tax rate of 2 percent.If operated in this state, the plant is expected to generate $930,000 of pretax profit.Which state should Hyundai choose Why do you think the plant in the state with a lower tax rate would produce a lower before-tax income