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

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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

jeff jeffy answered 1 year ago

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