Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (c)Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (c)Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%.
(c)Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
$
Transcribed Image Text:TABLE 12-1
Future Value (Amount) of an Ordinary Annuity of
Periods
1%
2%
3%
4%
5%
6%
7%
8%
Periods
1
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1
2
2.00500
2.01000
2.01500
2.02000 2.03000
2.04000
2.05000
2.06000
2.07000
2.08000
2
3
3.01502
3.03010
3.04522
3.06040 3.09090
3.12160
3.15250
3.18360
3.21490
3.24640
3
4
4.03010
4.06040
4.09090
4.12161
4.18363
4.24646
4.31013
4.37462
4.43994
4.50611
4
5.05025
5.10101
5.15227
5.20404
5.30914
5.41632
5.52563
5.63709
5.75074
5.86660
5
6.
6.07550
6.15202
6.22955
6.30812 6.46841
6.63298
6.80191
6.97532
7.15329
7.33593
6
7
7.10588
7.21354
7.32299
7.43428
7.66246
7.89829
8.14201
8.39384
8.65402
8.92280
7
8
8.14141
8.28567
8.43284
8.58297
8.89234
9.21423
9.54911
9.89747
10.25980
10.63663
8
9.
9.18212
9.36853
9.55933
9.75463 10.15911 10.58280 11.02656 11.49132
11.97799
12.48756
9.
10
10.22803 10.46221 10.70272 10.94972 11.46388 12.00611 12.57789 13.18079
13.81645
14.48656
10
11
11.27917
11.56683 11.86326 12.16872 12.80780 13.48635 14.20679 14.97164
15.78360
16.64549
11
12
12.33556 12.68250 13.04121 13.41209 14.19203 15.02581 15.91713 16.86994
17.88845
18.97713
12
13
13.39724 13.80933 14.23683 14.68033 15.61779 16.62684 17.71298 18.88214
20.14064
21.49530
13
14
14.46423
14.94742 15.45038 15.97394 17.08632 18.29191 19.59863 21.01507
22.55049
24.21492
14
15
15.53655 16.09690 16.68214 17.29342 18.59891 20.02359 21.57856 23.27597
25.12902
27.15211
15
16
16.61423 17.25786 17.93237 18.63929 20.15688 21.82453 23.65749 25.67253
27.88805
30.32428
16
17
17.69730 18.43044 19.20136 20.01207 21.76159 23.69751 25.84037 28.21288
30.84022
33.75023
17
18
18.78579
19.61475 20.48938 21.41231 23.41444 25.64541 28.13238 30.90565
33.99903
37.45024
18
19
19.87972 20.81090 21.79672 22.84056 25.11687 27.67123 30.53900 33.75999
37.37896
41.44626
19
20.97912 22.01900 23.12367 24.29737 26.87037 29.77808 33.06595 36.78559
40.99549
45.76196
20
21
22.08401 23.23919 24.47052 25.78332 28.67649 31.96920 35.71925 39.99273
44.86518
50.42292
21
22
23.19443 24.47159 25.83758 27.29898 30.53678 34.24797 38.50521 43.39229
49.00574
55.45676
22
23
24.31040 25.71630 27.22514 28.84496 32.45288 36.61789 41.43048 46.99583
53.43614
60.89330
23
24
25.43196 26.97346 28.63352 30.42186 34.42647 39.08260 44.50200 50.81558
58.17667
66.76476
24
25
26.55912 28.24320 30.06302 32.03030 36.45926 41.64591 47.72710 54.86451
63.24904
73.10594
25
26
27.69191 29.52563 31.51397 33.67091 38.55304 44.31174 51.11345 59.15638
68.67647
79.95442
26
27
28.83037 30.82089 32.98668 35.34432 40.70963 47.08421 54.66913 63.70577
74.48382
87.35077
27
28
29.97452 32.12910 34.48148 37.05121 42.93092 49.96758 58.40258 68.52811
80.69769
95.33883
28
29
31.12439 33.45039 35.99870 38.79223 45.21885 52.96629 62.32271 73.63980
87.34653
103.96594
29
20
Transcribed Image Text:32
34.60862
37.49407 40.68829 44.22703 52.50276 62.70147 75.29883 90.88978
110.21815 134.21354
32
33
35.78167 38.86901 42.29861 46.11157 55.07784 66.20953 80.06377 97.34316 118.93343 145.95062
33
34
36.96058 40.25770 43.93309 48.03380 57.73018 69.85791 85.06696 104.18375 128.25876 158.62667
34
35
38.14538 41.66028 45.59209 49.99448 60.46208 73.65222 90.32031 111.43478 138.23688 172.31680
35
36
39.33610 43.07688 47.27597 51.99437 63.27594 77.59831 95.83632 119.12087 148.91346 187.10215
36
(1 + i)" – 1
The values in Table 12-1 were generated by the formula
rate per period and n is the total number of periods.
and rounded to five decimal places, where i is the interest
TABLE 12-1
Future Value (Amount) of an Ordinary Annuity of $1
(Continued)
Periods
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
Periods
1
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1.00000
1
2.09000
2.10000
2.11000
2.12000
2.13000
2.14000
2.15000
2.16000
2.17000
2.18000
3
3.27810
3.31000
3.34210
3.37440
3.40690
3.43960
3.47250
3.50560
3.53890
3.57240
3
4
4.57313
4.64100
4.70973
4.77933
4.84980
4.92114
4.99338
5.06650
5.14051
5.21543
4
5
5.98471
6.10510
6.22780
6.35285
6.48027
6.61010
6.74238
6.87714
7.01440
7.15421
5
7.52333
7.71561
7.91286
8.11519
8.32271
8.53552
8.75374
8.97748
9.20685
9.44197
7
9.20043
9.48717
9.78327
10.08901
10.40466 10.73049
11.06680
11.41387
11.77201
12.14152
7
8
11.02847 11.43589 11.85943 12.29969 12.75726 13.23276
13.72682
14.24009
14.77325
15.32700
8
13.02104 13.57948 14.16397 14.77566 15.41571 16.08535
16.78584
17.51851
18.28471
19.08585
9.
10
15.19293 15.93742 16.72201 17.54874 18.41975 19.33730
20.30372
21.32147
22.39311
23.52131 10
11
17.56029 18.53117 19.56143 20.65458 21.81432 23.04452
24.34928
25.73290
27.19994
28.75514 11
12
20.14072 21.38428 22.71319 24.13313 25.65018 27.27075
29.00167
30.85017
32.82393
34.93107 12
13
22.95338 24.52271 26.21164 28.02911 29.98470 32.08865
34.35192
36.78620
39.40399
42.21866 13
14
26.01919 27.97498 30.09492 32.39260 34.88271 37.58107
40.50471
43.67199
47.10267
50.81802 14
15
29.36092 31.77248 34.40536 37.27971 40.41746 43.84241
47.58041
51.65951
56.11013
60.96527 15
16
33.00340 35.94973 39.18995 42.75328 46.67173 50.98035 55.71747
60.92503
66.64885
72.93901 16
17
36.97370 40.54470 44.50084 48.88367 53.73906 59.11760
65.07509
71.67303
78.97915
87.06804 17
18
41.30134 45.59917 50.39594 55.74971 61.72514 68.39407
75.83636
84.14072
93.40561 103.74028 18
19
46.01846 51.15909 56.93949 63.43968 70.74941 78.96923
88.21181
98.60323
110.28456 123.41353 19
51.16012 57.27500 64.20283 72.05244 80.94683 91.02493 102.44358 115.37975
130.03294 146.62797 20
20
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