Taxation Question - Thomas is 35 and is planning on making a one tax-deductible $4,500 contribution of his after-tax salary to a deductible IRA (implying the after-tax cost of his contribution was only $2,925). His investment (taxable corporate bonds) will earn a 12% annual return, and he plans on liquidating the investment in 15 years. His current and future marginal tax rate on ordinary income is 35%: his marginal tax rate on capital gains is 15%. He will be required to pay an additional 10% penalty because he liquidates the IRA before reaching age 59.5. Part A- After taxes, how much cash will Thomas have after liquidating the IRA? (Hint: it's either $16,010, $11,048, $24,631, or $13,547) Part B - What will his annualized after-tax rate of return be using this savings vehicle? Part C-Would Thomas be better off investing the available funds in a non-dividend paying stock that yields a 15% pretax return? (Hint: Make sure to hold the after-tax contribution constant when comparing alternatives) Taxation Question - Thomas is 35 and is planning on making a one tax-deductible $4,500 contribution of his after-tax salary to a deductible IRA (implying the after-tax cost of his contribution was only $2,925). His investment (taxable corporate bonds) will earn a 12% annual return, and he plans on liquidating the investment in 15 years. His current and future marginal tax rate on ordinary income is 35%: his marginal tax rate on capital gains is 15%. He will be required to pay an additional 10% penalty because he liquidates the IRA before reaching age 59.5. Part A- After taxes, how much cash will Thomas have after liquidating the IRA? (Hint: it's either $16,010, $11,048, $24,631, or $13,547) Part B - What will his annualized after-tax rate of return be using this savings vehicle? Part C-Would Thomas be better off investing the available funds in a non-dividend paying stock that yields a 15% pretax return? (Hint: Make sure to hold the after-tax contribution constant when comparing alternatives)