Roger Is Considering Making a $6,000 Investment in a Venture

question 106

Multiple Choice

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?

• A) $0
• B) $1,800
• C) $2,200
• D) $2,400
• E) None of the above

---

Definitions:

Variable Costs

Expenses that change in proportion to the amount of goods produced or the extent of services rendered.

Sales Quantity

The total number of units of a product sold in a particular period.

Fixed Costs

Expenses that are constant in total, regardless of changes in the volume of activity within a relevant period.

Total Fixed Cost

Total fixed cost is an accounting term describing the sum of all expenses within a company that do not change with the level of production or sales, such as rent, salaries, and insurance.