Amanda would like to organize bal as either an llc (taxed as a sole proprietorship) or a c corporation. in either form, the entity is expected to generate an 8 percent annual before-tax return on a $500,000 investment. amanda’s marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). if amanda organizes bal as an llc, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional medicare tax. also, she is eligible to claim a full deduction for qualified business income on bal’s income. assume that bal will distribute half of its after-tax earnings every year as a dividend if it is formed as a c corporation.
what is the overall tax rate on bal’s income in the first year if bal is organized as an llc or as a c corporation?

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?