C. F. Jordon Management Services has operatedfor the last

Chapter 17, Problem 17.13

(choose chapter or problem)

C. F. Jordon Management Services has operatedfor the last 26 years in a northern province wherethe provincial income tax on corporate revenue is6% per year. C. F. Jordon pays an average federaltax of 23% and reports taxable income of $7million. Because of excessive labor cost increases,the president wants to move to another province toreduce the total tax burden. The new province mayhave to be willing to offer tax allowances or aninterest-free grant for the first couple of years to attract the company. You are an engineer with thecompany and you are asked to do the following:(a) Determine the effective tax rate for C. F.Jordon.(b) Estimate the provincial tax rate that would benecessary to reduce the overall effective taxrate by 10% per year.(c) Determine what the new province wouldhave to do financially for C. F. Jordon tomove and to reduce its effective tax rate to22% per year.