Jamie is an employee at ABC Ltd.and is in a 45% tax bracket.ABC Ltd.has a tax rate of 27%.The company has offered Jamie a 10% pay raise.Jamie's current salary is $50,000.
Required:
A) Calculate the after-tax cost of the raise to the ABC Ltd.
B) Calculate the after-tax value of the raise for Jamie.
Show all calculations.

Question

Quizplus · Accepted Answer

The Answer is A) After-tax cost to ABC Ltd.: ($50,000 * 10%) * (1 - .27) = $3,650
B) After-tax value for Jamie: ($50,000 * 10%) * (1 - .45) = $2,750

Jamie Is an Employee at ABC Ltd