If a Company Has an Income Tax Rate of 40

question 47

Multiple Choice

If a company has an income tax rate of 40% and fixed costs of $105,000,and wishes to earn an after-tax profit of $150,000,what must its pre-tax income be?

• A)$375,000
• B)$425,000
• C)$250,000
• D)$175,000

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Definitions:

Issuer

An entity that develops, registers, and issues financial instruments like stocks, bonds, or credit cards for the purpose of financing.

Negotiations With Underwriters

Discussions and arrangements concerning terms and conditions between the issuer of a security and the financial entities responsible for selling it to the public.

Underwriters

Professionals or companies that assess and take on financial risk, as in the issuance of insurance policies or investment securities.

Registration Document

An official document filed with a regulatory body to declare the particulars of a new issue of securities, a new company, or a vehicle.