The ABC Corp. had net income before taxes of $4000,000 and sales of $2,000,000. If it is in the 50% tax bracket its after-tax profit margin is?
A. 5%
B. 10%
C. 20%
D. 25%
net income $400,000 - 50% taxes = $200,000
$200,000 / $2,000,000 sales = 10% after-tax profit margin
After tax = before tax - tax %of before tax. = 400000 - 200000 = 200000answer
To calculate the after-tax profit margin, you need to follow a few steps.
Step 1: Calculate the taxes paid by multiplying the net income before taxes by the tax rate.
In this case, the net income before taxes is $400,000 and the tax bracket is 50%. So, the taxes paid would be $400,000 multiplied by 50%, which equals $200,000.
Step 2: Calculate the after-tax profit by subtracting the taxes paid from the net income before taxes.
In this case, the after-tax profit would be $400,000 minus $200,000, which equals $200,000.
Step 3: Calculate the after-tax profit margin by dividing the after-tax profit by the sales.
In this case, the sales are $2,000,000 and the after-tax profit is $200,000. So, the after-tax profit margin would be $200,000 divided by $2,000,000, which equals 0.10 or 10%.
Therefore, the answer is B. 10%.