Answer: $480,350
Explanation:
Income is calculated by deducting expenses from the sales which includes the Cost of Goods sold.
The Cost of Goods sold is given to be 63% of the Sales Next year and the Operating Expenses are given to be 30% of the sales.
That means a total of,
= 63 + 30
= 93%
93% of the sales will be deducted from the sales as expenses.
$290,000 will also be owed as interest so needs to be removed from the sales as well.
Calculating that will give,
= 14,700,000 - 14,700,000(0.93) - 290,000
= 14,700,000 - 13,671,000 - 290,000
= $739,000
This is the income after interest and expenses.
Now the tax has to be accounted for.
With a tax rate of 35%, the income minus tax will be,
= 739,000 ( 1 - 0.35)
= 739,000 * 0.65
= $480,350
$480,350 is the after-tax estimate if income for the following year.
