The marginal income tax rate is 35% and before tax rate of return is 12.5% then the after tax rate of return is __________?
Correct answer: C. 0.08125
- A. 0.0613
- B. 0.0713
- C. 0.08125
- D. 0.0913
Explanation
The after-tax return is calculated as pre-tax return multiplied by one minus the tax rate: 12.5% × (1 − 0.35) = 8.125%, or 0.08125. The tax reduces the return by 35%, not by 35 percentage points.
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