Earlier in the year, Mrs. G, a business manager for Company RW, evaluated a prospective opportunity that could generate $20,000 additional taxable income. Mrs. G determined that the company's marginal tax rate on this income would be 25 percent.
Later in the year, a different manager evaluated another opportunity that could generate $100,000 additional taxable income. This manager referred to Mrs. G's earlier evaluation and used the same 25 percent marginal rate in his analysis of after-tax cash flows.
Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question