Reid Inc. received a $90,000 cash payment, of which only $50,000 was taxable income. If Reid's marginal tax rate is 40%, compute Reid's after-tax cash flow.

Question

Quizplus · Accepted Answer

Reid's after-tax cash flow is calculated by subtracting the taxes paid on the taxable income from the total cash received. Taxes paid = $50,000 * 40% = $20,000. Therefore, after-tax cash flow = $90,000 - $20,000 = $70,000, which is not listed among the options provided.

Reid Inc Received a $90,000 Cash Payment, of Which Only $50,000