Firm E must choose between two alternative transactions. Transaction 1 requires a $13,250 cash outlay that would be nondeductible in the computation of taxable income. Transaction 2 requires a $18,700 cash outlay that would be a deductible expense. Required:
Determine the after-tax cost for each transaction. Assume Firm E’s marginal tax rate is 25 percent.
Determine the after-tax cost for each transaction. Assume Firm E’s marginal tax rate is 45 percent.