Question

I am having trouble figuring out how to find an indifferent tax rate for the following problem.Assume that

a taxpayer can choose when he is to receive $10,000 of fully taxable income.
If the taxpayer receives the income at the end of Year 1, he will receive exactly $10,000.
If he delays receipt of the income until the end of Year 2, the amount will grow to
$11,000. If the taxpayer takes the money at the end of Year 1, he can invest the proceeds
and earn a pre- tax return of 10 percent over the next year. At what pre- tax rate of return, will the taxpayer be indifferent to taking the money in
Year 1 and Year 2?

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"