Assume Russo's has a debt-equity ratio of .4 and uses the capital asset pricing model to determine its cost of equity. As a result, the company's cost of equity:

$277,400

Explanation:

Data provided as per the question

Insurance expenses = $207,000

Tax rate = 20%

The computation of income tax expense is given below:-

Income tax expenses = Insurance expenses × Tax rate + Taxes payable

= $207,000 × 20% + $236,000

= $41,400 + $236,000

= $277,400

Therefore for computing the  income tax expense we simply multiply the insurance expenses with tax rate.