On a particular Saturday, Tom had planned to paint a room in his house, but his employer gave him the opportunity to work that day.If Tom works, he must hire a painter for $120.For Tom to have a positive cash flow from working and hiring the painter:
A)Tom must earn more than $160 if he is in the 25% marginal tax bracket.
B)Tom must earn at least $160 if he is in the 33% marginal tax bracket.
C)Tom must earn at least $150 if he is in the 25% marginal tax bracket.
D)Tom must earn at least $135 if he is in the 15% marginal tax bracket.
E)None of the above.

Question

Quizplus · Accepted Answer

To have a positive cash flow, Tom's after-tax earnings must exceed the $120 cost of hiring the painter. In the 25% tax bracket, Tom needs to earn more than $160 because $160 - 25% of $160 = $120.

On a Particular Saturday, Tom Had Planned to Paint a Room