Taxpayer D has $100,000 in an investment paying 12 percent taxable interest per annum. Each year d has $1,500 of expenses relating to this investment. Compute D’s annual net cash flow from the investment assuming the following: a. D’s marginal income tax rate is 15 percent, and the annual expense is deductible.
b. D’s marginal income tax rate is 25 percent and the annual expense is not deductible.