Question #26
Reading: Reading 14 Financial Statement Modeling
PDF File: Reading 14 Financial Statement Modeling.pdf
Page: 15
Status: Unattempted
Question
Cynbo Industries Limited operates in two countries Mazat and Napat. The effective tax rates of Cynbo's operations in Mazat and Napat are 15% and 22% respectively. For the most recent fiscal year, Cynbo reported profit before tax of $350 and $200 for Mazat and Napat respectively. For the next year, it is expected that Cynbo's profit will grow at 5% and 8% for Mazat and Napat respectively. The effective tax rate for Cynbo for the next fiscal year is closest to:
Answer Choices:
A. 19.4%
B. 17.6%
C. 18.5%
Explanation
Given the growth forecasts, Cynbo's forecasted profit before tax, taxes and profit after tax
are 583.50, 102.65, and 480.86 respectively. Effective tax rate = 102.65/583.50 = 17.60%
Current
PBT
Growth
Rate
E(PBT)
Tax Rate
Tax
EAT
Mazat
350
5%
367.50
15%
55.13
312.38
Napat
200
8%
216.00
22%
47.52
168.48
Total
550
583.50
102.65
480.86