Video: Calculating Return on Investment Net of Tax

Personal financial planning for individuals involves the strategic management of financial aspects in a person's life, including budgeting, saving, investing, retirement planning, and tax considerations, all intended to achieve personal economic goals and ensure financial security over the long term.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, we're gonna wrap up with our last topic, calculating return on ROI, return on ROI, return on investment, also known as ROI. Got a few slides in this, a few examples. This is essentially just calculating what did you make back. Now, if you were with us for BEC, or if you are now seeing those BEC lessons on BARR, which is where they were reassigned to after the AICPA made their changes to this exam, you'll know that generally calculating the ROI on something is inflows divided by outflows. If you've gone through BARR, you'll see those lessons where I'm just nonstop saying outflows divided by inflows, inflows divided by outflows, which that's generally how you calculate something, right? The cost of something is going to be inflows and outflows, right? Think about what was the total cost of your college? Well, it's going to take into account all of the interest you paid, comparing it to the amount of money you needed for college. And the excess is the cost, the interest rate. Similarly, what's your rate of return on something? The new minus the old divided by the old. That's the inflows and outflows. So what's your total inflows divided by your total outflows? So let's see an example here. We get a high yield savings account. So set, you're going to get, let's say 3%, or in this case, 2% every year. The tax rate on interest is 22%, because guess what? This is a taxable high yield savings account. If you're watching, depending on when you're watching this, a high yield savings account could be, it could be anywhere. I mean, it could be a 5%, it could be a 15%. You know, when my parents are buying a house, I think interest

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Individual compliance, tax & financial planning

Module: 2 Concepts, 23 Videos

Introduction to Individual Tax Compliance and Planning

6:41

Impact of Equity Compensation Awards on Taxable Income

8:53

Alternative Minimum Taxable Income

6:29

Imputed Interest and Foreign-Earned Income