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ABC Corporation Is in a 25% Income Tax Bracket

Question 1

Essay

ABC Corporation is in a 25% income tax bracket. John Adams is an employee at ABC and is in a 40% tax bracket. The company has offered John a 10% pay raise. His current salary is $50,000.
Required:
A) Calculate the after-tax cost of the raise to the corporation.
B) Calculate the after-tax value of the raise for John.
Show all calculations.

Correct Answer:

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