Omar Inc. paid a $24,000 expense, only $18,000 of which was deductible. If Omar's marginal tax rate is 40%, compute the after-tax cost of the expense.

Question

Quizplus · Accepted Answer

The deductible portion of the expense is $18,000. Since Omar's marginal tax rate is 40%, the tax savings from the deduction will be $18,000 x 40% = $7,200.

Therefore, the after-tax cost of the expense will be $24,000 - $7,200 = $16,800.

Choice C is the correct answer.

Omar Inc Paid a $24,000 Expense, Only $18,000 of Which Was