cheat sheet fin - Be able to calculate the average tax rate...

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Be able to calculate the average tax rate by applying the marginal tax rate schedule. Your average tax rate is your tax bill divided by your taxable income— in other words, the percentage of your income that goes to pay taxes. Your marginal tax rate is the rate of the extra tax you would pay if you earned one more dollar. The percent- age tax rates shown in Table 2.3 are all marginal rates. Put another way, the tax rates in Table 2.3 apply to the part of income in the indicated range only, not all income. The difference between average and marginal tax rates can best be illustrated with a simple example. Suppose our corporation has a taxable income of $200,000. What is the tax bill? Using Table 2.3, we can figure our tax bill: .15($ 50,000)=$ 7,500 .25($ 75,000 - 50,000) = 6,250 .34($100,000 - 75,000)= 8,500 .39($200,000 - 100,000) = 39,000 $61,250 Our total tax is thus $61,250. In our example, what is the average tax rate? We had a taxable income of $200,000 and a tax bill of $61,250, so the average tax rate is $61,250/200,000 e 30.625%. What is the marginal tax rate? If we made one more dollar, the tax on that dollar would be 39 cents, so our marginal rate is 39 percent. What are the approaches of MIRR? Discount negative cashflow(last yr)/(1+20)^the power of negative cahsflow-initial inv=new initial cahslfow Find rate of return= new inv +untouched(positive) cashflow/1+r=0 solve for r reinvesment(compounding)= [untouched cashflow(1+r)+negative cashflow(last yr)] irr=initial cashflow+ending cashflow/1+r^the power of ending cashflow
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