Antonio would like to replace his golf clubs with a custom measured set. A local sporting goods megastore is advertising custom clubs for $570, including a new bag. In-store financing is available at 3.52 percent or he can choose not to renew his $600 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 3.42 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why? The after-tax CD earnings rate is nothing%. (Round to two decimal places.)
The answer is 2.37%
it is occurred as follows 3.42(1-0.25-0.0575) i.e equals to 2.37% approximately
so it is better if he cash in his cd to purchase the golf club as after tax earnings are 2.37% whereas instore financing is available at 3.52%.
Antonio would like to replace his golf clubs with a custom measured set. A local sporting...
Antonio would like to replace his golf clubs with a custom measured set. A local sporting goods megastore is advertising custom clubs for $630, including a new bag. In-store financing is available at 3.64 percent or he can choose not to renew his $600 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 4.45 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and...