Question

A firm’s income statement included the following data. The firm’s average tax rate was 25%.

Cost of goods sold	$	8,900
Income taxes paid	$	2,900
Administrative expenses	$	3,900
Interest expense	$	1,900
Depreciation	$	1,900

a. What was the firm’s net income?

b. What must have been the firm's revenues?

c. What was EBIT?

Answer 1

Given about a firm,

Tax rate = 25%

Income taxes paid = $2900

a). EBT = income taxes paid/Tax rate = 2900/0.25 = $11600

So, net income = EBT*(1-Tax rate) = 11600*(1-0.25) = $8700

b).

Cost of goods sold	$	8,900
Income taxes paid	$	2,900
Administrative expenses	$	3,900
Interest expense	$	1,900
Depreciation	$	1,900

So, EBIT = EBT + interest = 11600 + 1900 = $13500

So, total revenue = EBIT + COGS + Administrative expenses + Depreciation = 13500 + 8900 + 3900 + 1900 = $28200

c. EBIT = $13500