If investors require a 14% after-tax return, how much does your firm have to return on a pre-tax basis if your firm pays taxes at the marginal rate of 34%?

Question

Quizplus · Accepted Answer

To find the pre-tax return needed to achieve a 14% after-tax return when the tax rate is 34%, you use the formula: Required Pre-Tax Return = After-Tax Return / (1 - Tax Rate). Plugging in the numbers: 14% / (1 - 0.34) = 21.2%.

If Investors Require a 14% After-Tax Return, How Much Does