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westover corporation, a publicly held company with a 21% tax rate, paid its peo an annual salary of $1 million plus a year-end bonus of $500,000. the bonus was based on a targeted amount of annual gross revenue. ignoring payroll taxes, calculate the after-tax cost of this payment.

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If Westover corporation, a publicly held company with a 21% tax rate, paid its peo an annual salary of $1 million plus a year-end bonus of $500,000.  The after-tax cost of this payment is $1.290 million.

How tom find the after-tax cost ?

Using this formula to determine the after -tax cost of this payment

After-tax cost = (Annual salary  + Year-end bonus) - Tax savings

Let plug in the formula

After-tax cost = ($1 million +$500,000) - ($1 million Ă— 21%)

After-tax cost =  ($1.5 million - $210,000)

After-tax cost = $1.290 million

Therefore the after-tax cost is the amount of $1.290 million.

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