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Mr. Trail engaged in a current year transaction generating $50,000 of cash but only $40,000 of taxable income and $10,000 of nontaxable income. If Mr. Trail’s marginal tax rate is 40%, compute his after tax cash flow from the transaction.

Respuesta :

Answer:

$34,000

Explanation:

Given that,

Cash generated = $50,000

Taxable income = $40,000

Non taxable income = $10,000

Marginal tax rate = 40%

Hence,

After tax cash flow:

= Cash generated in a current year - (Taxable income × Marginal tax rate)

= $50,000 - ($40,000 × 40%)

= $50,000 - $16,000

= $34,000

Therefore, the after tax cash flow from the transaction is $34,000.

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