Question
At the end of 2021, your company recorded taxable income of $6,022. Tax rate this year was 25%. You are facing uncertainty regarding future income
At the end of 2021, your company recorded taxable income of $6,022. Tax rate this year was 25%.
You are facing uncertainty regarding future income and tax rates and would like to prepare a scenario analysis.
You narrowed down the possibilities for next year to the following:
* Taxable income: 4 scenarios - a. Decrease of 20%, b. No change, c. Increase of 10%, d. Increase of 15%.
* Tax rate: 2 scenarios - a. 20%, b. 35%
Suppose the probabilities for each scenario are the following:
income -20% | income same | income +10% | income +15% | |
tax rate 20% | 0.1 | 0.2 | 0.1 | 0.1 |
tax rate 35% | 0.1 | 0.2 | 0.1 | 0.1 |
what is the expected net income next year? (round your answer to the nearest dollar)
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