Net multiplier = break-even rate / inverse of target profit

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    Yuan Ma

    Hi Valerie,

    Thank you for your response. I did see this post before. But when I try to derive the formula myself, it still did not make sense as to these three questions. Could you elaborate on this formula? Thank you.

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    Matthew Bowers

    Yuan, multiplying by the target profit constitutes a mark-up. Mark-up and profit are not the same thing. Here is a discussion where I explain the difference in more detail.

    And here is a more cleanly formatted 'master formula' that you need to know heading into the exam. It's important that you understand the relationships, not just memorize the formula.

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    Yuan Ma

    Hi Matthew,

    Thank you for the explanation. I think I got this now. There are 2 issues here. First, "inverse" in this case is "1-target profit rate". So if the target profit is 20%, the inverse of it will be 80%, not 1/0.2

    Second, the break-even + the target profit should be 100%, not 120%

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