Question

Bright Lighting Company is unlevered with 2 million shares outstanding and total cash flow before taxes of $525,000. Compute Bright s taxes owed if all corporate income is taxed at 34 percent.

		$346,500
		$178,000
		$150,000
		$178,500
		$125,000

. Compute Bright s net income after tax if all corporate income is taxed at 34 percent.

Compute Bright s after-tax equity earnings per share if all corporate income is taxed at 34 percent.

Answer 1

The net income after tax is computed as follows:

= Total cash flow before taxes x (1 - tax rate)

= $ 525,000 x (1 - 0.34)

= $ 525,000 x 0.66

= $ 346,500

Earnings per share is computed as follows:

= Net income after tax / Number of shares outstanding

= $ 346,500 / 2,000,000

= $ 0.17 per share Approximately

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