Question

In its fourth year, a project is expected to generate earnings before interest, taxes, depreciation, and amortization of $123,884 and its depreciation and amortization expense is expected to be $25,252. If the company’s tax rate is 35%, what is the project’s expected net operating profit after taxes for the year?

Answer 1

$64,111

Explanation:

The computation of the project’s expected net operating profit after taxes for the year is shown below:-

Earning before interest and tax is

= earnings before interest, taxes, depreciation, and amortization - depreciation and amortization expense

= $123,884 - $25,252

= $98,623

Profit After tax = Earning before interest and tax × (1 - Tax rate)

= $98,623 × (1 - 35%)

= $64,111

Therefore we have applied the above formula to reach the profit after tax.