Question

KRJ Enterprises reported this year sales of $404 million, earnings before income taxes of $102.4 million, and tax expense of $18.2 million. If sales are projected to increase by 3.8% next year, what would be the projected tax expense for next year

Answer 1

The KRJ Enterprises' projected tax expense for the next year is $18.87 million.

Data and Calculations:

Reported year's sales = $404 million

Earnings before income taxes =$102.4 million (25% of sales)

Tax expense =$18.2 million

The tax expense = 4.5% of Sales ($18.2.$404 x 100)

Projected sales for next year = $419.35 million ($404 x 1.038)

Projected tax expense = $18.87 million ($419.35 x 4.5%)

Thus, the projected tax expense for the next year is $18.87 million.

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