Question
In: Finance
Sugar Land Inc. recently reported $15,000 of sales, $7,500 of operating costs other than depreciation, and...
Sugar Land Inc. recently reported $15,000 of sales, $7,500 of operating costs other than depreciation, and $1,200 of depreciation. The company had no amortization charges, it had outstanding $6,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 35%. How much was the firm's net income after taxes?
a. $3,284.55
b.$3,457.42
c.$3,639.39
d.$3,830.94
e.$4,022.48
Solutions
Expert Solution
d.$3,830.94
Working;
| Sales | $ 15,000.00 | ||||||
| Operating costs other than depreciation | -7,500.00 | ||||||
| Depreciation Expense | -1,200.00 | ||||||
| Earning Before Interest and Taxes | 6,300.00 | ||||||
| Interest Expense | -406.25 | ||||||
| Earning Before Taxes | 5,893.75 | ||||||
| Tax Expense | -2,062.81 | ||||||
| Net Income after tax | $ 3,830.94 | ||||||
| Working: | |||||||
| Interest Expense | = | Bonds Face Value * Interest rate | |||||
| = | $ 6,500.00 | * | 6.25% | ||||
| = | $ 406.25 | ||||||
| Tax Expense | = | Profit Before Tax * Tax Rate | |||||
| = | 5,893.75 | * | 35% | ||||
| = | 2,062.81 | ||||||
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