Question

Red Royal Industrial is evaluating the medical clinic project. During year 1, the medical clinic project is expected to have relevant revenue of 647,200 dollars, relevant variable costs of 207,600 dollars, and relevant depreciation of 63,700 dollars. In addition, Red Royal Industrial would have one source of fixed costs associated with the medical clinic project. Red Royal Industrial just signed a deal with Orange Valley Consulting to develop an advertising campaign for use in the project. The terms of the deal require Red Royal Industrial to pay Orange Valley Consulting either 74,500 dollars in 1 year if the project is pursued or 100,100 dollars in 1 year if the project is not pursued. Relevant net income for the medical clinic project in year 1 is expected to be 268,162 dollars. What is the tax rate expected to be in year 1? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer 1

Expected revenue	$                                       6,47,200
Variable costs	$                                          63,700
Fixed costs
Depreciation	$                                          63,700
Other costs	$                                          74,500
Profit before tax	$                                       4,45,300
Profit after tax	$                                       2,68,162
Tax amount	$                                       1,77,138
Profit before tax	$                                       4,45,300
Tax rate	0.40

Please Like the solution if satisfied with the answer and if any query please mention it in comments...thanks