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:

Interest Rate Risk

The risk that changes in interest rates will adversely affect the value of an investment, particularly relevant for fixed-income securities.

Variable-Rate Assets

Assets that earn interest at rates which adjust over time based on prevailing market conditions.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Treasury Bills

are short-term government securities with maturity dates typically one year or less, often used as a risk-free benchmark in financial markets.