Question

Emery Mining Inc. recently reported $147,500 of sales, $75,500 of operating costs other than depreciation, and $10,200 of depreciation. The company had $16,500 of outstanding bonds that carry a 7.25% interest rate, and its federal-plus-state income tax rate was 25%. How much was the firm's net income? The firm uses the same depreciation expense for tax and stockholder reporting purposes. (Round your intermediate and final answers to two decimal places.)

Answer 1

We are given,

Sales = $147,500

Opex = $75,500

Depreciation = $10,200

Interest on bond = 16,500 * 7.25% = $1,196.25

Tax rate = 25%

We can calculate Net income by the following formula,

Net income = (sales - opex - depreciation - interest) * (1-tax)

Net income = (147,500 - 75,500 - 10,200 - 1,196.25)*(1-0.25)

Net income = $45,452.81.

Hence the Net income of firm is $45,452.81.

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answered by: anonymous