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Questions
Q:
Market risk is also called __________ and _________.
A. systematic risk; diversifiable risk
B. systematic risk; nondiversifiable risk
C. unique risk; nondiversifiable risk
D. unique risk; diversifiable risk
Q:
Economic profits are found by total revenues minusA) explicit costs. B) explicit and implicit costs.C) implicit costs. D) all opportunity costs.
Q:
In a limited partnership, a general partner
A) is excluded from management of the business.
B) is not entitled to a bonus at the end of the year.
C) has limited liability for partnership debt.
D) has unlimited liability for partnership debt.
Q:
Consider an investment opportunity set formed with two securities that are perfectly negatively correlated. The global minimum-variance portfolio has a standard deviation that is always _________.
A. equal to the sum of the securities' standard deviations
B. equal to -1
C. equal to 0
D. greater than 0
Q:
Which of the following is a reason to use a partnership as the legal form of a business?
A) Partnerships avoid the issue of mutual agency.
B) Partnerships avoid the issue of unlimited liability.
C) Partnerships avoid the issue of double-taxation faced by corporations.
D) Partnerships avoid the difficulty of raising capital.
Q:
Let the quantity of hamburgers be measured along the vertical axis and the quantity of movies be measured along the horizontal axis. If the price of a hamburger is $1.50 and the price of a movie is $6, then the slope of the budget line isA) -6. B) -4. C) -3. D) -0.25.
Q:
Approximately how many securities does it take to diversify almost all of the unique risk from a portfolio?
A. 2
B. 6
C. 8
D. 20
Q:
Slices of PizzaTotal UtilityMarginal Utility00-120 250 3 204 105 0In the above table, the total utility of 4 slices of pizza isA) 50. B) 70. C) 80. D) 20.
Q:
Use the following information to answer the question(s) below.Quincy has decided to retire from the partnership of Quincy, Robert, and Sam. The partnership will pay Quincy $400,000. Total partnership capital should be revalued based on the excess payment to Quincy. (Assume the book values of the assets listed below equals fair values.) A summary balance sheet for the Quincy, Robert, and Sam partnership appears below. Quincy, Robert, and Sam share profits and losses in a ratio of 1:1:3, respectively.AssetsCash $ 150,000Marketable securities 76,000Inventory 164,000Land 300,000Building-net 510,000Total assets $1,200,000EquitiesQuincy, capital 320,000Robert, capital 280,000Sam, capital 600,000Total equities $1,200,000What partnership capital will Robert have after Quincy retires?A) $200,000B) $280,000C) $360,000D) $440,000
Q:
The risk that can be diversified away is __________.
A. beta
B. firm-specific risk
C. market risk
D. systematic risk
Q:
The cross price elasticity of demand between two goods is 50. We may conclude thatA) the two goods are very complementary and probably are sold together. B) the two goods are poor substitutes for each other.C) the demand for one of the goods is likely to be fairly elastic and the demand for the other good is likely to be fairly inelastic.D) the demand for each of the goods is likely to be very elastic.
Q:
Beta is a measure of security responsiveness to _________.
A. firm-specific risk
B. diversifiable risk
C. market risk
D. unique risk
Q:
If the partnership agreement provides a formula for the computation of a bonus to the partners, the bonus would be computed
A) next to last, because the final allocation is the distribution of the profit residual.
B) before income tax allocations are made.
C) after the salary and interest allocations are made.
D) in any manner agreed to by the partners in the partnership agreement.
Q:
PricePer Unit Quantity DemandedPer Week$10.00259.50309.00358.50408.00457.50507.00556.50606.00655.50705.0075Refer to the above table. Demand is least price elastic at a price ofA) $10.00. B) $7.50. C) $7.00. D) $5.00.
Q:
Your great aunt Zella invested $100 in 1925 in a portfolio of large U.S. stocks that earned a compound return of 10% annually.If she left that money to you, how much would be in the account 90 years later in 2015?A. $1,000B. $9,900C. $531,302D. $5,843,325
Q:
Drawings
A) are advances to a partnership.
B) are loans to a partnership.
C) are a function of interest on partnership average capital.
D) are the same nature as withdrawals.
Q:
Common property ownership is most apt to lead toA) an efficient allocation of resources.B) production at a rate at which price is less than social cost. C) a decrease of externalities.D) an increase in pollution.
Q:
What is the VaR of a $10 million portfolio with normally distributed returns at the 5% VaR? Assume the expected return is 13% and the standard deviation is 20%.
A. 13%
B. -13%
C. 19.90%
D. -19.90
Q:
Use the following information to answer the question(s) below.Alfred and Barne share profits and losses in a ratio of 2:3, respectively, after salary allowances, interest allowances and bonus allocations. Alfred and Barne receive salary allowances of $30,000 and $60,000, respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners' drawings are not used in determining the average capital balances. Total net income for 2011 is $180,000. If net income after deducting the interest and salary allocations is more than $60,000, Barne receives a bonus of 5% of the original amount of net income.Alfred BarneJanuary 1 capital balances $ 600,000 $ 900,000Yearly drawings ($3,000 a month) 36,000 36,000The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership income, after deduction of the bonus. If the partnership's income is $140,000, how much is Partner Y's bonus allocation?A) $12,727B) $13,860C) $14,000D) $15,400
Q:
An individual with no deductible on his or her health insurance policy will tend to engage in a lifestyle that is less healthy than a person with a $2,000 insurance deductible. This is said to be a problem ofA) healthy selection. B) moral hazard.C) wellness training. D) blue-zoning.
Q:
Which measure of downside risk predicts the worst loss that will be suffered with a given probablility?
A. standard deviation
B. variance
C. value at risk
D. Sharpe ratio
Q:
If a minimum wage is established, a monopsonist facesA) an upward sloping supply of labor at all quantities of labor.B) a downward sloping supply of labor at all quantities of labor.C) a horizontal supply of labor at the minimum wage and the upward sloping portion of the labor supply curve above minimum wage.D) a horizontal supply of labor at the minimum wage and the downward sloping portion of the labor demand curve below minimum wage.
Q:
The normal distribution is completely described by its _______.
A. mean and standard deviation
B. mean and variance
C. mode and standard deviation
D. median and variance
Q:
A business enterprise that allows the hiring of nonunion members conditional on their joining the union isA) a closed shop. B) a union shop.C) a jurisdictional dispute. D) an industrial union.
Q:
If you believe you have a 60% chance of doubling your money, a 30% chance of gaining 15%, and a 10% chance of losing your entire investment, what is your expected return?
A. 5%
B. 15%
C. 54.5%
D. 114.5%
Q:
We would expect that a fall in labor supply will have a proportionately larger effect on the market wage rate whenA) capital goods exist that can replace many of the workers.B) the product produced in the industry has several close substitutes.C) the product produced in the industry makes up a large portion of most familiesʹ budgets. D) labor represents a relatively small portion of total costs.
Q:
You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends.What is the dollar-weighted return over the entire time period?A. 2.87% B..74% C. 2.6%D. 2.21%
Q:
Which of the following is exempt from antitrust laws?A) Professional football B) Petroleum companiesC) Airlines D) Hospitals
Q:
Use the following information to answer the question(s) below.Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of $3,000 per month are not used in determining the average capital balances. Total net income for 2011 is $240,000.Bertram ErnestJanuary 1 capital balances $200,000 $240,000Yearly drawings ($3,000 a month) (36,000) (36,000)Permanent withdrawals of capital:June 3 (24,000)May 2 (30,000)Additional investments of capital:July 3 80,000October 2 100,000If the average capital balances for Bertram and Ernest are $200,000 and $240,000, what will the total partnership profit allocations be for Bertram and Ernest in 2011?A) $100,000 and $140,000B) $108,000 and $132,000C) $120,000 and $120,000D) $140,000 and $100,000
Q:
If we observe firms earning zero economic profits in the short run, we know thatA) the industry must be perfectly competitive.B) the industry must be either perfectly competitive or monopolistically competitive. C) there must not be any barriers to entry.D) any market structure is possible since firms under any market structure can earn zero profits at some time.
Q:
Which of the following arguments supporting passive investment strategies is (are) correct?
I. Active trading strategies may not guarantee higher returns but guarantee higher costs.
II. Passive investors can free-ride on the activity of knowledge investors whose trades force prices to reflect currently available information.
III. Passive investors are guaranteed to earn higher rates of return than active investors over sufficiently long time horizons.
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Q:
FirmAnnual SalesFirmAnnual SalesA$1000G$800B900H1200C120I1050D75J90E50K75F40L600According to the above table, the four-firm concentration ratio of this industry isA) 69.2 percent. B) 35.1 percent. C) 66.7 percent. D) 67.5 percent.
Q:
The CAL provided by combinations of 1-month T-bills and a broad index of common stocks is called the ______.
A. SML
B. CAPM
C. CML
D. total return line
Q:
In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit ofA) -$1,400. B) $2,100. C) $1,400. D) $700.
Q:
(p. $$pageTag$$) A loan for a new car costs the borrower .8% per month. What is the EAR?
A. .80%
B. 6.87%
C. 9.6%
D. 10.03%
Q:
Use the following information to answer the question(s) below.A summary balance sheet for the Lemon, Mango, and Nobb partnership appears below. Lemon, Mango, and Nobb share profits and losses in a ratio of 2:3:5, respectively.AssetsCash $ 100,000Marketable securities 200,000Inventory 125,000Land 100,000Building-net 500,000Total assets $1,025,000EquitiesLemon, capital $ 425,000Mango, capital 400,000Nobb, capital 200,000Total equities $1,025,000The partners agree to admit Oran for a one-fifth interest. The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000. The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership.What will the profit and loss sharing ratios be after Oran's investment?A) 1:2:4:2B) 2:3:5:2C) 3:4:6:2D) 4:6:10:5
Q:
A monopolist determines the profit-maximizing outputA) at the point at which TR = TC. B) at the point at which MR = MC.C) at any point it wants because it is the only producer of the product.D) at the point at which TR is maximum.
Q:
The buyer of a new home is quoted a mortgage rate of .5% per month. What is the APR on the loan?
A. .50%
B. 5%
C. 6%
D. 6.5%
Q:
For a perfectly competitive firm at its long -run equilibrium, A) P = MR = MC = AC.B) P = MR > MC.C) accounting profit must be zero.D) there are no opportunity costs to be concerned with.
Q:
According to historical data, over the long run which of the following assets has the best chance to provide the best after-inflation, after-tax rate of return?
A. long-term Treasury bonds
B. corporate bonds
C. common stocks
D. preferred stocks
Q:
Which of the following is not true for a perfectly competitive firm?A) P = MR B) AR = MR C) MR = TR D) P = AR
Q:
If the nominal rate of return on investment is 6% and inflation is 2% over a holding period, what is the real rate of return on this investment?
A. 3.92%
B. 4%
C. 4.12%
D. 6%
Q:
Austin contributes his computer equipment to the landscaping partnership he starts with Bentley. At what amount should the computer equipment be credited to Austin's partnership capital?
A) The tax basis
B) The fair value at the date of contribution
C) Austin's original cost
D) At the amount that Bentley contributes, with the assumption that they both contribute equally to the partnership
Q:
What is the geometric average return over 1 year if the quarterly returns are 8%, 9%, 5%, and 12%?
A. 8%
B. 8.33 %
C. 8.47%
D. 8.5 %
Q:
OutputFixed CostsVariable CostsTotal CostsAverage Total CostsAverage Marginal Variable Costs Costs0 $0$100 1 30 2 50 3 60 4 120 5 200 In the above table, what is the average total cost to produce 5 units of output?A) $80 B) $55 C) $40 D) $60
Q:
What is the geometric average return of the following quarterly returns: 3%, 5%, 4%, and 7%?
A. 3.72%
B. 4.23%
C. 4.74%
D. 4.90%
Q:
In economics, how long is the long run?
A) More than 12 months
B) 24 months or longer
C) 5 years or more
D) Whatever time it takes a firm to vary all inputs
Q:
Partnerships
A) are required to prepare annual reports.
B) are required to file income tax returns but do not pay Federal income taxes.
C) are required to file income tax returns and pay Federal income taxes.
D) are not required to file income tax returns or pay Federal income taxes.
Q:
Which one of the following would be considered a risk-free asset in real terms as opposed to nominal?A. money market fundB. U.S. T-billC. short-term corporate bondsD. U.S. T-bill whose return was indexed to inflation
Q:
The opportunity cost of capital is
A) an explicit cost.
B) a part of economic profits.
C) usually unknown and must be estimated by looking at the price of capital goods.
D) the normal rate of return.
Q:
In the Uniform Partnership Act, partners have
I. mutual agency.
II. unlimited liability.
A) I only
B) II only
C) I and II
D) Neither I nor II
Q:
You invest all of your money in 1-year T-bills. Which of the following statements is (are) correct?
I. Your nominal return on the T-bills is riskless.
II. Your real return on the T-bills is riskless.
III. Your nominal Sharpe ratio is zero.
A. I only
B. I and III only
C. II only
D. I, II, and III
Q:
A partner assigned his partnership interest to a third party. Which statement best describes the legal ramifications to the assignee?
A) The assignment of the partnership interest does not entitle the assignee to partnership assets upon a liquidation.
B) The assignment dissolves the partnership.
C) The assignee has the right to share in the management of the partnership.
D) The assignee does not become a partner but has the right to share in future partnership profits and to receive the proper share of partnership assets upon liquidation.
Q:
The consumption possibilities curve is theA) supply curve. B) demand curve.C) budget constraint. D) indifference curve.
Q:
The price of a stock is $38 at the beginning of the year and $41 at the end of the year. If the stock paid a $2.50 dividend, what is the holding-period return for the year?
A. 6.58%
B. 8.86%
C. 14.47%
D. 18.66%
Q:
Slices of PizzaTotal UtilityMarginal Utility00-120 250 3 204 105 0In the above table, the marginal utility of the second slice of pizza isA) 20. B) 30. C) 50. D) 10.
Q:
Under the Uniform Partnership Act, loans made by a partner to the partnership are treated as
A) liabilities to the partnership for which interest shall be paid from the date of the advance.
B) advances to the partnership that are carried in the partners' capital accounts.
C) Accounts Payable of the partnership for which interest is paid.
D) advances to the partnership for which interest does not have to be paid.
Q:
Tillman Fabrications has five operating segments, as summarized below: WoodPlasticMetalPaperFabricSales to outside entities5,200,0001,200,0007,800,0001,600,0006,300,000Intersegment sales390,0004,700,000-0--0-750,000Operating Profit(520,000)(590,000)1,700,000190,000(960,000)Assets690,000450,000880,000280,000760,000 Required:Determine which of the operating segments of Tillman Fabrications are reportable segments for the period shown.
Q:
The price of X falls by ten percent, and the quantity demanded of X increases by ten percent. Meanwhile, the quantity demanded of Y increases by ten percent too. We would conclude thatA) demand for X is elastic, and X and Y are substitutes.B) demand for X is elastic, and X and Y are complements.C) demand for X is unit-elastic, and X and Y are complements. D) demand for X is inelastic, and X and Y are unrelated.
Q:
From 1926 to 2013 the world stock portfolio offered _____ return and _____ volatility than the portfolio of large U.S. stocks.
A. lower; higher
B. lower; lower
C. higher; lower
D. higher; higher
Q:
Snodberry Catering has five operating segments, as summarized below: BuffetAlcoholBakeryWait ServiceBar ServiceSales to outside entities26,000110,00022,00024,0005,000Intersegment sales-0-20,0004,000-0-56,000Cost of goods sold16,00050,00019,00023,00069,000Operating Expenses9,00070,0006,0002,0004,000Interest Expense-0-5,000-0-2,0001,000Income Tax Expense-0-2,000-0--0-(3,000)Assets2,00022,0002,0001,0001,000 Required:Determine which of the operating segments of Snodberry Catering are reportable segments for the period shown.
Q:
PricePer Unit Quantity DemandedPer Week$10.00259.50309.00358.50408.00457.50507.00556.50606.00655.50705.0075Refer to the above table. What is the absolute price elasticity of demand when price changes from $5.50 to $5.00?A) 0.72 B) 0.79 C) 1.38 D) 5.0
Q:
The Manhawkin Fund has an expected return of 16% and a standard deviation of 20%. The risk-free rate is 4%. What is the reward-to-volatility ratio for the Manhawkin Fund?
A. .8
B. .6 C. 9
D. 1
Q:
Rollins Publishing has five operating segments, as summarized below: FictionNon-fictionReferenceChildrensPeriodicalsSales to outside entities870,000416,000796,000236,000517,000Intersegment sales-0--0-80,000-0-50,000Cost of goods sold430,000270,000290,00065,000420,000Operating Expenses120,00089,00095,00074,000238,000Interest Expense-0-61,000-0--0-24,000Income Tax Expense80,000(1,000)120,00024,000(28,000)Assets22,00024,00029,00016,000100,000 Required:Determine which of the operating segments of Rollins Publishing are reportable segments for the period shown.
Q:
Economic theory suggests that if natural resources can be held as private property, then
A) conservation will be nonexistent.
B) owners will have an incentive not to abuse them.
C) natural resources will be sold off for immediate use.
D) people will simply hold them and refuse to make them available.
Q:
A security with normally distributed returns has an annual expected return of 18% and standard deviation of 23%. The probability of getting a return between -28% and 64% in any one year is _____.
A. 68.26%
B. 95.44%
C. 99.74%
D. 100%
Q:
Quantex Corporation has five operating segments, as summarized below: HouseholdIndustrialPackagingStorageServicesSales to outside entities700,0004,300,000400,0001,700,000100,000Intersegment sales50,000600,000800,000200,000-0-Cost of goods sold300,0002,700,000700,000900,000-0-Operating Expenses200,0001,300,000200,000600,00030,000Interest Expense10,00040,0005,000-0--0-Income Tax Expense60,000210,00070,000100,00018,000Assets540,0001,900,0001,600,00070,00032,000Required:Determine which of the operating segments of Quantex Corporation are reportable segments for the period shown.
Q:
Among the reasons that health care expenditures have grown so rapidly in the United States over the last two decades are all of the following EXCEPTA) an emphasis on wellness programs and preventive medicine. B) the aging of the U.S. population.C) expensive new medical technologies.D) third-party financing.
Q:
The following information was collected together for the Lawson Company relating to the preparation of their annual financial statements for 2011. For each item, indicate "yes" or "no" as to whether the item must be disclosed in the annual report._____ 1. Names of major customers for all reportable segments_____ 2. Interest revenue and expense for all reportable segments_____ 3. Cost of Goods Sold for all reportable segments_____ 4. Depreciation expense and amortization expense for all reportable segments_____ 5. Revenue from external customers for all reportable segments_____ 6. The basis for aggregating any operating segments to arrive at reporting segments_____ 7. Income tax expense (or benefit) for all reportable segments_____ 8. Total assets for all reportable segments_____ 9. Type of product or service for all reportable segments_____ 10. Extraordinary items for all reportable segments
Q:
Use the above table. The data shows that the firmA) is hiring in a perfectly competitive labor market.B) is selling its output in a perfectly competitive market.C) is a monopsonist.D) is selling its output in an imperfectly competitive market.
Q:
Osprin Corporation has three operating segments, as summarized below: CapsulePillLiquidTotalSales to retailers25,00035,0005,00065,000Intersegment sales4,00010,0002,00016,000Operating Expenses10,00018,0005,00033,000Interest Expense2,0003,0001,0006,000Income Tax Expense4,0006,0001,00011,000Assets12,0003,00016,00031,000Required:1. Using the revenue test, what is the minimum amount of revenue of a reportable segment?2. Using the operating profit or loss test, what is the minimum amount of operating profit or loss of a reportable segment?3. Using the asset test, what is the minimum amount of assets of a reportable segment?4. Based on the three tests, which segments will be separately reported?
Q:
A closed shop is aA) strike by a union in sympathy with another unionʹs strike or cause.B) dispute involving two or more unions over which should have control of a particular jurisdiction.C) business enterprise in which employees must belong to the union before they can be hired and must remain in the union after they are hired.D) legal environment in which businesses may hire nonunion members conditional on their joining the union by some specified date after employment begins.
Q:
Nettle Corporation is preparing its first quarterly interim report. It is subject to a corporate income tax rate of 20% on the first $50,000 of taxable income and 35% on taxable income above $50,000. Its estimated pretax accounting income for 2011, by quarter, is:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $75,000 $165,000 $143,000 $120,000 $503,000Nettle expects to earn and receive operating income for the year and does not contemplate any changes in accounting procedures or principles that would affect its pretax accounting income.Required:1. Determine Nettle's estimated effective tax rate for 2011.2. Prepare a schedule to show Nettle's estimated net income for each quarter of 2011.
Q:
Suppose there are four industries. Labor costs are 80 percent of total costs in industry A, 60 percent in B, 45 percent in C, and 10 percent in D. In which of these industries will a 10 percent increase in the price of labor reduce quantity demanded of labor by the largest proportion?A) A B) B C) C D) D
Q:
Which of the following is NOT exempt from antitrust laws?A) Professional baseball B) Labor unionsC) Airlines D) Public transit systems
Q:
Krull Corporation is preparing its interim financial statements for the third quarter of calendar 2011.The following trial balance information is available for third quarter:Account Debit CreditCash $98,000Accounts Receivable 285,000Inventory 750,000Fixed assets 600,000Accounts Payable $300,000Common Stock 50,000Retained Earnings 80,000Sales 4,400,000Administrative expense 312,000Cost of goods sold 2,650,000Loss on sale of securities sold on July 30 75,000Annual equipment overhaul costs paid on August 1 60,000Totals $4,830,000 $4,830,000Additional information:At the end of the year, Krull distributes annual employee bonuses and charitable donations that are estimated at $40,000, and $12,000, respectively. The cost of goods sold includes the liquidation of a $45,000 base layer in inventory that Krull will restore in the fourth quarter at a cost of $75,000. Effective corporate tax rate for 2011 is 32%.Required:Prepare Krull's interim income statement for the third quarter of calendar 2011.
Q:
Maxtil Corporation estimates its income by calendar quarter as follows for 2011:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $40,000 $30,000 $20,000 $20,000 $110,000Income tax rates applicable to Maxtil:From: $0 to $50,000 15%From: $50,001 to $75,000 25%Over: $75,000 35%Required:Determine Maxtil's estimated effective tax rate.
Q:
Firms face downward sloping demand curves in
A) monopolies only.
B) monopolies and oligopolies only.
C) monopolies and oligopolies that collude only.
D) all market structures except perfect competition.
Q:
You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. The dollar values of your positions in X, Y, and Treasury bills would be _________, __________, and __________, respectively, if you decide to hold a complete portfolio that has an expected return of 8%.
A. $162; $595; $243
B. $243; $162; $595
C. $595; $162; $243
D. $595; $243; $162
Q:
Leotronix Corporation estimates its income by calendar quarter as follows for 2011:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $30,000 $40,000 $40,000 $50,000 $160,000Income tax rates applicable to Leotronix:From: $ 0 to $50,000 15%From: $50,001 to $75,000 25%Over: $75,000 35%Required:Determine Leotronix's estimated effective tax rate.