An Employee of Stenton Printing Whose Current Annual Salary Is

question 47

Short Answer

An employee of Stenton Printing whose current annual salary is $44,000 has the option of taking an annual raise of 8%/year for the next 3 yr or a fixed annual raise of $3,300/year. Which option would be more profitable to him considering his total earnings over the 3-yr period?
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Annual raise of __________ /year

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Definitions:

Section 1245

A provision of the Internal Revenue Code relating to the recapture of depreciation on certain types of property when sold.

Ordinary

Pertaining to regular or usual conditions, occurrences, or business activities that are not exceptional.

Section 1221

A section of the U.S. Internal Revenue Code that defines all real and personal property subject to depreciation as assets, excluding inventory.

Trade or Business

Regular, continuous, and substantial activities engaged in by an entity to generate income or profit.