Lima’s current pre tax annual compensation - US $ 140,000
If I do post tax here @ 25% = 140,000 * (1-25%) = US $ 105,000 minus the current annual living expenses 96,000 = 9000-----> this is the amount i can contribute to TDA account annually
Guideline answer done it different way----annual living expense = $ 96,000----Gross it up for tax = 96,000 / 0.75 = $128,000
So pre tax income 140,000 - 128000 = $ 12000 I can contribute to my TDA account???
and that is what it says elsewhere… she contributes 12K to her TDA.
remember TDA contrib is before tax contrib.
^ ya though I included 12k contribution to TDA & got the return calculation rt…but the way they have explained was confusing hence asked…
both numbers work out.
12K provided directly
140 - 96/(0.75) = 12 K
end result - nothing left over from Salary after contrib to the TDA.
So the Investment portfolio does not grow due to another inflow every period … remains at 225K to start with.
With it growing by an amount every period - it would have been very difficult to solve for the IRR.
^ thanks as always