2008 AM, Q1 A (ii) net, investment, required, needed

Darien

Question
A. i. Prepare the return objectives portion of the Tracys’ investment policy statement
(IPS) that will apply if they retire at age 60.
ii. Calculate the pre-tax nominal rate of return that is required for the Tracys’ first
year of retirement if they retire at age 60. Show your calculations.


Guidliene answer says:
After-tax net income needed (45,000)
Pretax net income needed (using 20% tax rate) (56,250)


Question-why use pre-tax income ?