Estimate the gross income for Lopez Enterprises when it had a CFAT of $2.5 million, $900,000 in expenses, $900,000 in depreciation charges, and an effective tax rate of 26.4%.

What will be an ideal response?


CFBT = CFAT + taxes
GI – OE = CFAT + (GI – OE – D)(Te)

GI = [CFAT + OE(1 - Te) - DTe]/ (1 - Te)
= [2,500,000 + 900,000(0.736) – 900,000(0.264)]/0.736
= $3,973,913

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