Question

A division of Hanes has the following data at the end of a year. Total revenue = $48 million Depreciation = $8.2 million Operating expenses = $28 million For an effective federal tax rate of 35% and state tax rate of 6.5%, determine the

a.)CFAT-

choices are

1.)$21.37 million

2.)$15.37 million

3.)$25.37 million

4.)$10.37 million

B.)Total Taxes

Choices are.

1.)$4.629 million

2.)$4.459 million

3.)$4.539 million

4.)$4.729 million

C.)NPAT -

choices are

1.)$6.17 million

2.)$9.17million

3.)7.17 million

4.)8.17 milliom

Answer 1

Solution a:

Computation of CFAT
Particulars	Amount (In Million)
Total revenue	$48.00
Operating expenses	$28.00
Depreciation	$8.20
Income before state and federal tax	$11.80
State Tax (6.5%)	$0.77
Income before federal tax	$11.03
Federal tax (35%)	$3.86
Net Income after taxes	$7.17
Add: Depreciation	$8.20
CFAT	$15.37

Hence option 2 is correct.

Solution b:

Total taxes = Federal tax + State tax = $3.862 + $0.767 = $4.629 million

Hence option 1 is correct.

Solution c:

Refer table in a, Net profit after tax = $7.17 million

Hence option 3 is correct.