Essay
Greene Banking Co. uses CVP analysis to consider the profitability of its automobile loan division. The target after-tax profit for all automobile loans (according to the budget this year) is $750,000. Smith sets the interest rates of automobile loans to return a target contribution margin (not considering the time value of money) of $1,500 per loan. The division incurs $150,000 in fixed costs every year. Smith's marginal tax rate is 25%.
How many loans must Greene issue in order to achieve this after-tax target profit?
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