• anonymous
Working on Aswath's Fall 2009 Quiz 2...problem 1 in year 3...why is tax only 40? 40% tax on 150 EBIT is 60. With NOL for year 3 being 50 and Reinvestment being 50, why not just make the tax amount 50 to eliminate the NOL?
  • Stacey Warren - Expert
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  • katieb
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  • anonymous
The NOL is used to reduce your taxable income from 150 to 100. You then pay 40% of the taxable income, which gives you 40 as taxes. I am not sure where you are getting 50.. and why that would eliminate the NOL.

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