Lansing Corporation,a publicly held company with a 35% marginal tax rate,paid its CEO an annual salary of $2.3 million.Ignoring payroll taxes,calculate the after-tax cost of this payment.

Question

Quizplus · Accepted Answer

The after-tax cost is calculated by reducing the salary by the tax savings from the deduction. The tax savings is $2.3 million * 35% = $0.805 million. Therefore, the after-tax cost is $2.3 million - $0.805 million = $1.495 million.

Lansing Corporation,a Publicly Held Company with a 35% Marginal Tax