A proposed new investment has projected sales of $832,000. Variable costs are 57 percent of sales, and fixed costs are $187,260; depreciation is $94,500. Assume a tax rate of 30 percent. What is the projected net income

The net income before tax is $170500 and net income after tax is $119350

Explanation:

firstly we identify operating expenses and non operating expenses which are in this case variable costs and fixed costs which are costs directly involved in the operations of the business, then we have depreciation and the tax rate which are non operational costs that are not directly involved in the business operations directly. so for net income we use the operating costs or expenses to get net income, therefore we calculate the variable costs as we are told it is 57% of sales so $832000 x57% = $474 240

Then we are given fixed costs of $187260 then to get net income before tax we say: sales - operating expenses = net income before tax.

$832000 - ($ 474240 + $187260) = $170 500 which is our income tax then for income after tax we will say net income before tax (1-tax Percentage) = net income after tax.

$170500 (1 - 30%) = $119350.

The projected net income of the proposed investment is $53,200.