Question

If an investor has a $5,000 pretax return, the state tax rate is 4.5%, and the federal tax rate is 22.0%, what is the real investment value?

$1,325
$3,675
$3,900
$4,775

Answer 1

Real value = 5,000 × (1 − 0.045 − 0.22) = 5,000 × 0.735 = $3,675.