A company with an income tax rate of 40% and an objective of an after-tax target operating profit of $48,000 should generate a before-tax target operating profit of $120,000.
48,000/(1-.4)= $80,000.

Question

Quizplus · Accepted Answer

To achieve an after-tax target operating profit of $48,000 with a tax rate of 40%, the calculation should be $48,000 / (1 - 0.4) = $80,000, not $120,000.

A Company with an Income Tax Rate of 40% and an Objective