The Merry Co. has current annual sales of $350,000 and a net profit margin of 6%. Sales are expected to increase by 5% annually while the profit margin is expected to remain constant. What is the projected after- tax earnings for two years from now?

Question

Quizplus · Accepted Answer

The projected sales in two years will be $350,000 * (1.05)^2 = $385,875. With a net profit margin of 6%, the after-tax earnings will be 6% of $385,875, which is $23,153.