Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remai

Question

Elliot makes $250,000 a year and pays 30% taxes on $150,000 and 35% on his remaining salary. His expenses are $110,000 (per year). He wants to invest a fixed amount EVERY day into an investment fund for 5 years and he hopes to get a 12% return. (20 PTS)

What is the maximum amount he can invest every day? (5 PTS) (Find the annual investment amount and divide by 365).

What will be the worth of his portfolio after 5 years? (5 PTS)

After 5 years, Kassidy’s income increases to $300,000. He wants to reinvest for another 5 year, but this time, his return will be 10% and his expenses have increased by 15%. What will be the worth of his portfolio after 5 years (total of 10 years)? (5 PTS)

What will the Present Value of his portfolio, assuming a 6% discount rate and NPER is 10 years

Explanation / Answer

Ans:

Income before tax = $250000

Tax = [ 150000 x 0.30 ] + [ 100000 x 0.35 ]

= $80000

Income after tax and expenses = 250000 - 80000 - 110000 = $60000

Thus the maximum amount that can be invested every day = 60000 / 365 = $164.38

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