(a) Define the following tax terms: graduated tax rates , marginal tax rate , and indexing .

(b) Describe a fundamental difference between each of the following terms: net operating income (NOI), taxable income (TI), and net operating profit after taxes (NOPAT).

Question

(a) Define the following tax terms: graduated tax rates , marginal tax rate , and indexing .

(b) Describe a fundamental difference between each of the following terms: net operating income (NOI), taxable income (TI), and net operating profit after taxes (NOPAT).

Accepted Answer

[latex](a)[/latex] Graduated rates: higher taxable incomes pay taxes at higher rates.

Marginal rate: The portion of each taxable dollar of [latex]TI[/latex] that is paid in taxes on the last dollar of income, e.g., [latex]34[/latex]%. Indexing: Updating of the [latex]TI[/latex] limits (not the rates) each year to account for inflation and other factors.

[latex](b)[/latex] [latex]NOI =[/latex] gross income - operating expenses [latex]= GI - OE[/latex]

Taxable income removes depreciation from the [latex]NOI[/latex] amount; [latex]TI = GI - OE - D NOPAT[/latex] is [latex]TI[/latex] with taxes removed; or [latex]NOI[/latex] with depreciation and taxes removed: [latex]NOPAT = (TI) -[/latex] taxes [latex]= (GI - OE - D) -[/latex] taxes [latex]= (NOI - D) -[/latex] taxes

Question : (a) Define the following tax terms: graduated tax rates , ma...