The Penn Central Railroad has not paid local taxes since 1969, under federal bankruptcy court protection. Some years later the court required Penn Central to offer municipalities a choice of two payment options to clear this liability. (PennCentral had been absorbed by Conrail, so there were no future tax liabilities involved.) The choices were (a) immediate payment of 44 percent of the total liability or (b) immediate payment of 20 percent of the liability, 10 percent paid at the end of each of the next three years, and 50 percent paid at the end of ten years. Which alternative would you recommend to a municipality and why?

The Penn Central Railroad has not paid local taxes since 1969, under federal bankruptcy court protection. Some years later the court required Penn Central to offer municipalities a choice of two payment options to clear this liability. (PennCentral had been absorbed by Conrail, so there were no future tax liabilities involved.) The choices were (a) immediate payment of 44 percent of the total liability or (b) immediate payment of 20 percent of the liability, 10 percent paid at the end of each of the next three years, and 50 percent paid at the end of ten years. Which alternative would you recommend to a municipality and why?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.5CE: Energy entrepreneur T. Boone Pickens has proposed converting the trucking fleet in the United States...

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