On a Particular Saturday, Tom Had Planned to Paint a Room

question 20

Multiple Choice

On a particular Saturday, Tom had planned to paint a room in his house, but his employer gave him the opportunity to work that day. If Tom works, he must hire a painter for $120. For Tom to have a positive cash flow from working and hiring the painter:

• A)Tom must earn more than $160 if he is in the 25% marginal tax bracket.
• B)Tom must earn at least $160 if he is in the 33% marginal tax bracket.
• C)Tom must earn at least $150 if he is in the 25% marginal tax bracket.
• D)Tom must earn at least $135 if he is in the 15% marginal tax bracket.
• E)None of these.

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Definitions:

Dividend Payout Ratio

A financial metric that measures the percentage of a company's earnings paid out to shareholders as dividends.

Capital Budget

The process and plan for determining and allocating resources for capital or investment projects within an organization.

Common Stock

Equity ownership in a company, granting holders voting rights and a share in the company’s profits through dividends.

WACC

A calculation known as the Weighted Average Cost of Capital determines a corporation's capital costs by proportionally weighting different categories of capital.