a)
To determine: Average tax rate and marginal tax rate of a single tax payer.
a)
Explanation of Solution
Given information:
The income of the single tax payer is $20,000.
The slab rates of single tax payers are as follows, they are
If the taxable income is $20,000 then up to $9,275 the tax rate is 10% and after that remaining balance is charged under 15% tax rate.
Calculation of taxes:
Hence, taxes are $2,535.95.
Calculation of Average tax rate:
Hence, average tax rate is 12.70%.
The marginal rate of tax is the tax rate that a person is incurred on his income of each additional dollar. Here the marginal rate is 15% incurred on each additional dollar of his income.
b)
To determine: Average tax rate and marginal tax rate of a single tax payer.
b)
Explanation of Solution
Given information:
The income of the single tax payer is $50,000.
If the taxable income is $50,000 then up to $9,275 the tax rate is 10%, after that tax rate is 15% up to $37,650 then, after remaining balance is charged under 25% tax rate.
Calculation of taxes:
Hence, taxes are $8,270.75.
Calculation of Average tax rate:
Hence, average tax rate is 16.50%
The marginal rate of tax is the tax rate that a person is incurred on his income of each additional dollar. Here the marginal rate is 25% incurred on each additional dollar of his income.
c)
To determine: Average tax rate and marginal tax rate of a single tax payer.
c)
Explanation of Solution
Given information:
The income of the single tax payer is $300,000.
If the taxable income is $300,000 then up to $9,275 the tax rate is 10%, after that tax rate is 15% up to $37,650, up to $91,150 the tax rate is 25% and up to $190,150 the tax rate is 28% and up to $413,350 the tax rate is 33%, then the remaining balance is charged under 35% tax rate.
Calculation of taxes:
Hence, taxes are $82,528.59.
Calculation of Average tax rate:
Hence, average tax rate is 27.50%.
The marginal rate of tax is the tax rate that a person is incurred on his income of each additional dollar. Here the marginal rate is 33% incurred on each additional dollar of his income.
d)
To determine: Average tax rate and marginal tax rate of a single tax payer.
d)
Explanation of Solution
Given information:
The income of the single tax payer is $3,000,000.
Calculation of taxes:
Hence, taxes are $1,144,170.
Calculation of Average tax rate:
Hence, average tax rate is 38.1%
The marginal rate of tax is the tax rate that a person is incurred on his income of each additional dollar. Here the marginal rate is 39.6% incurred on each additional dollar of his income.
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Chapter 3 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
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