Start with 100.
21% Return gives 121 after one year.
Increase is 21%
42% of 21% is 8.8% paid in taxes.
Are you SURE you don't want to rethink your answer to Part B?
I'm trying to solve a 3 part problem which has the following questions:
a) Determine the rate of return before taxes.
After Solving: Answer: 21 %
b) If the effective income tax rate is 42 percent, what is the approximate after-tax rate of return?
After Solving: Answer: 8 %
c) What is the actual after-tax rate of return?
I don't really understand this question, I can't tell the difference between (approximate after-tax rate of return) and (actual after-tax rate of return)
Does anyone Know the difference?