If Thomas has a 37 percent tax rate and a 7 percent after-tax rate of return, $78,500 of income in five years will cost him how much tax in today's dollars? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.)
$29,045. |
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$78,500. |
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None of the choices are correct. |
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$57,646. |
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$20,709. |
Taxes payable in five years = $78,500 X 37% = $29,045
Taxes payable in today's dollars = future value of taxes X present value factor = $29,045 / (1+7%)^5 = $20,709
Correct answer is $20,709.
Please RATE the answer.
If Thomas has a 37 percent tax rate and a 7 percent after-tax rate of return,...
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