Chapter 18.III, Problem 30RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

BUSINESS DECISION: INVESTING YOUR TAX SAVINGS

You are a manager for Vector International. You cam $50,000 per year and are in the

a. How much tax do you save each year by making the retirement fund contributions?

b. How much will the retirement fund be worth in 30 years?

c. Although the income from this investment is taxable each year, how much will the “tax savings” fund be worth in 30 years?

**(a)**

To determine

**To calculate:** The amount of tax saved every year by making the retirement fund contributions in 28% tax bracket. The total earnings is $50,000. The tax free is $2,500 with the interest rate of 8% in retirement account and the aggressive growth mutual fund is averaged at 15%.

Explanation

**Given Information:**

The total earnings is $50,000 in 28% tax bracket. The tax free is $2,500 with the interest rate of 8% in retirement account and the aggressive growth mutual fund is averaged at 15%.

**Formula Used:**

The amount of tax saved every year is calculated by the formula:

**Calculation:**

Consider the provided information,

The total earnings is $50,000 in 28% tax bracket. The tax free is $2,500 with the interest rate of 8% in retirement account and the aggressive growth mutual fund is averaged at 15%.

Since, the taxable income is defined as the income to which tax rates are functional in order to discover the total amount of tax payable for the year

**(b)**

To determine

**To calculate:** The amount of retirement fund in 30 years if the total earnings is $50,000 in 28% tax bracket. The tax free is $2,500 with the interest rate of 8% in retirement account and the aggressive growth mutual fund is averaged at 15%.

**(c)**

To determine

**To calculate:** The amount of tax saving fund in 30 years, if the total earnings is $50,000 in 28% tax bracket. The tax free is $2,500 with the interest rate of 8% in retirement account and the aggressive growth mutual fund is averaged at 15%.

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