Problem: Lin Vu has $186,000 in an investment paying 7 percent taxable interest per annum. Each year Vu incurs $1,295 of expenses relating to this investment. Compute Vu's annual net cash flow assuming the following:
Required:
- Vu's marginal tax rate is 10 percent, and the annual expense is not deductible.
- Vu's marginal tax rate is 35 percent, and the annual expense is deductible.
- Vu's marginal tax rate is 25 percent, and the annual expense is not deductible.
- Vu's marginal tax rate is 40 percent, and only $780 of the annual expense is deductible.