If an investor has a $5,000 pretax return, the state tax rate is 4.5%, and the federal tax rate is 22.0%, what is the real investment value?

Subtract both taxes from the $5,000 pretax return. The total tax rate is 4.5% + 22.0% = 26.5%, so the after-tax value is $5,000 × (1 − 0.265) = $3,675. The correct choice is $3,675.

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