Steve purchases some land for $30,000. he maintains it, but makes no improvements to it. one year later he sells it for $32,000. stephanie puts $30,000 in a savings account that pays 6% interest. steve has to pay the 50% capital gains tax, stephanie is in the 35% tax bracket. the inflation rate was 2%. who had the higher before-tax real gain and who had the higher after-tax real gain?

1. The higher before tax real gain is for Steve for $2000 i.e (32,000- 30,000) while Stephanie makes $1800(6% of $30,000)

2. The higher after tax real gain is for Stephanie losing 35% of her income

which reduce her income to $1170 while Steve loss 50% of his income which reduce to $1000.

Explanation

The inflation rate is not considered in the calculation because it's constant for both parties.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.