2009 exam q # 1 a (II)

On the return calculation, inflation of 4 percent is added at the end. Since inflations are subject to taxes shouldnt inflation be added before computing before tax return? I have seen some prior solutions in which inflation is added prior to computing before tax returns. Hopefully someone has some insight on this!

always add inflation last. I have no idea what you mean by “inflations are subject to taxes”. First you want to arrive at a before-tax amount, then you want that amount to inflate.

Thanks for the help!