Ms. Zelda has decided to invest $75,000 in state bonds. She could invest in State A bonds paying 5 percent annual interest or in State R bonds paying 5.4 percent annual interest. The bonds have the same risk, and the interest from both is exempt from federal income tax. Because Ms. Zelda is a resident of State A, she wouldn't pay State A's 8.5 percent personal income tax on the State A bond interest, but she would pay this tax on the State R bond interest. Ms. Zelda can deduct any state tax payments in the computation of her federal taxable income, and her federal marginal rate is 32 percent. Required: a. Compute Ms. Zelda's after-tax return from State A and State R bonds. >. Should Ms. Zelda invest in the State A or the State R bonds? Complete this question by entering your answers in the tabs below. Required A Required B Compute Ms. Zelda's after-tax return from State A and State R bonds. Note: Enter costs with a minus sign. Round your intermediate computations and final answers amount. State A Before-tax return State A income tax Federal tax savings from deduction of state income tax After-tax return State R Before-tax return State R income tax Federal tax savings from deduction of state income tax After-tax return Required A Required B >
Ms. Zelda has decided to invest $75,000 in state bonds. She could invest in State A bonds paying 5 percent annual interest or in State R bonds paying 5.4 percent annual interest. The bonds have the same risk, and the interest from both is exempt from federal income tax. Because Ms. Zelda is a resident of State A, she wouldn't pay State A's 8.5 percent personal income tax on the State A bond interest, but she would pay this tax on the State R bond interest. Ms. Zelda can deduct any state tax payments in the computation of her federal taxable income, and her federal marginal rate is 32 percent. Required: a. Compute Ms. Zelda's after-tax return from State A and State R bonds. >. Should Ms. Zelda invest in the State A or the State R bonds? Complete this question by entering your answers in the tabs below. Required A Required B Compute Ms. Zelda's after-tax return from State A and State R bonds. Note: Enter costs with a minus sign. Round your intermediate computations and final answers amount. State A Before-tax return State A income tax Federal tax savings from deduction of state income tax After-tax return State R Before-tax return State R income tax Federal tax savings from deduction of state income tax After-tax return Required A Required B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Ms. Zelda has decided to invest $75,000 in state bonds. She could invest in State A
bonds paying 5 percent annual interest or in State R bonds paying 5.4 percent annual
interest. The bonds have the same risk, and the interest from both is exempt from
federal income tax. Because Ms. Zelda is a resident of State A, she wouldn't pay State
A's 8.5 percent personal income tax on the State A bond interest, but she would pay this
tax on the State R bond interest. Ms. Zelda can deduct any state tax payments in the
computation of her federal taxable income, and her federal marginal rate is 32 percent.
Required:
a. Compute Ms. Zelda's after-tax return from State A and State R bonds.
2. Should Ms. Zelda invest in the State A or the State R bonds?
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute Ms. Zelda's after-tax return from State A and State R bonds.
Note: Enter costs with a minus sign. Round your intermediate computations and final answers
amount.
State A
Before-tax return
State A income tax
Federal tax savings from deduction of state income tax
After-tax return
State R
Before-tax return
State R income tax
Federal tax savings from deduction of state income tax
After-tax returni
< Required A
Required B
>
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