Please choose the method to use when calculating the after-tax return.

Question

Quizplus · Accepted Answer

The method for calculating after-tax return is to subtract the amount of taxes paid from the total return. The formula for after-tax return is: After-Tax Return = Total Return - Taxes. The taxes paid are equal to the marginal tax rate multiplied by the taxable return. The nontaxable return is not subject to taxes, so it should be added to the after-tax return. Therefore, the correct formula is: After-Tax Return = Taxable Return x (1 - Marginal Tax Rate) + Nontaxable Return. The formula in choice D matches this format.

Please Choose the Method to Use When Calculating the After-Tax