An all-equity firm reports a net profit margin of 10% on sales of $3 million.If the tax rate is 40%,what is the pretax profit
A) $100,000
B) $300,000
C) $500,000
D) $800,000

Name: An all-equity firm reports a net profit margin of 10% on sales of $3 million.If the tax rate is 40%,what is the pretax profit A) $100,000 B) $300,000 C) $500,000 D) $800,000
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Question

Quizplus · Accepted Answer

Net profit margin = Net profit margin = (Pretax income − Taxes) / Sales0.10 = (1 − 0.4) × Pretax income / $3,000,000 → Pretax income = $500,000

An All-Equity Firm Reports a Net Profit Margin of 10