On a particular Saturday, Tom had planned to paint a room in his house, but his employer gave him the opportunity to work that day.If Tom works, he must hire a painter for $120.For Tom to have a positive cash flow from working and hiring the painter:
A)Tom must earn more than $158 if he is in the 24% marginal tax bracket.
B)Tom must earn at least $158 if he is in the 32% marginal tax bracket.
C)Tom must earn at least $140 if he is in the 24% marginal tax bracket.
D)Tom must earn at least $120 if he is in the 12% marginal tax bracket.
E)None of these.

Question

Quizplus · Accepted Answer

To have a positive cash flow, Tom must earn more than the cost of hiring the painter after taxes. In the 24% tax bracket, if Tom earns X, he takes home 76% of X (100% - 24%). To cover the $120 for the painter, the equation is 0.76X = $120. Solving for X gives X = $120 / 0.76 = $157.89. Therefore, Tom must earn more than $157.89, and the closest option that reflects this is earning more than $158 in the 24% marginal tax bracket.

On a Particular Saturday, Tom Had Planned to Paint a Room