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To: that_crazy_doug who wrote (20889)11/28/2000 6:26:41 PM
From: PetzRead Replies (1) | Respond to of 275872
 
QUIZ: A company using a 16% tax rate earns $1.00 per share after taxes in year 2000.

1) If the number of outstanding shares increases 5% and
2) the tax rate goes up to 31%,
how much will the company have to increase its pretax earnings to earn $1.00 per share in 2001?

a)15% b)20% c)25% d)28%

THE CORRECT ANSWER IS d)28%

(1 - 0.016)*x = (1-0.31)*y/1.05,
where x is pretax Y2000 earnings and y is pretax Y2001 earnings

y/x = (1-0.16)*1.05/(1-0.31)= 1.2783

Petz


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