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14 December, 18:21

If Julius has a 30% tax rate and a 10% after-tax rate of return, a $40,000 tax deduction in two years will save how much tax in today's dollars? Use Exhibit 3.1. (Round present and future value amounts to 3 places)

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  1. 14 December, 20:13
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    Answer: $9,912.

    Explanation: The easy way to calculate the answers as follows

    $40,000 *.30 (tax rate) *.826 (Discount Factor, 10%, 2 years) = $9,912.
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