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balu736 [363]
3 years ago
8

Reese, a calendar-year taxpayer, uses the cash method of accounting for her sole proprietorship. In late December, she received

a $65,000 bill from her accountant for consulting services related to her small business. Reese can pay the $65,000 bill anytime before January 30 of next year without penalty. Assume Reese's marginal tax rate is 32 percent this year and 35 percent next year, and that she can earn an after-tax rate of return of 12 percent on her investments.
Required:
a. What is the after-tax cost if she pays the $65,000 bill in December?
b. What is the after-tax cost if she pays the $65,000 bill in January?
Business
1 answer:
Alenkasestr [34]3 years ago
7 0

Answer:

a. $44,200

b. $44,684

Explanation:

To calculate after-tax costs we just need to deduct the tax saving amount from the pre-tax amount. The tax saving amount can be calculated bt multiplying the pre-tax amount into the tax rate

Requirement A (If she pays the $65,000 in December)

After-tax cost = Pre tax cost - PV of tax saving

After-tax cost = 65,000 - 20,800

After-tax cost = $44,200

working

Tax saving = $65,000 x 32%

Tax saving =  $20,800

Requirement B  (If she pays the $65,000 in January)

After tax cost = $65,000 - $20,315

After tax cost = $44,684

working

Tax saving = $65,000 x 35%

Tax saving = $22,750

Pv of tax saving = $22,750 x 0.893

Pv of tax saving = $20,316

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Answer:

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4 0
3 years ago
You just won $30,000 and deposited your winnings into an account that pays 3.9 percent interest, compounded annually. how long w
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For this case we have an equation of the form:
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7 0
3 years ago
g Cathy Rogers deposits $200 in currency in her checking account at a bank. This deposit is treated as:
Step2247 [10]

Answer: 4) No change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits

Explanation:

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2 years ago
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ollegr [7]

Answer:

Instructions are listed below

Explanation:

Giving the following information:

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A) We need to use the following formula:

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7 0
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