Management of Raley Company would like to achieve a target profit after taxes of $80,000.The company's income tax rate is 20 percent.What target profit before taxes is required to earn $80,000 in after tax profit?
A)$100,000
B)$64,000
C)$160,000
D)$400,000
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

To achieve an after-tax profit of $80,000 with a tax rate of 20%, the formula to calculate the target profit before taxes is: After Tax Profit / (1 - Tax Rate). Plugging in the numbers: $80,000 / (1 - 0.20) = $80,000 / 0.80 = $100,000.

Management of Raley Company Would Like to Achieve a Target