Question

Meric Mining Inc. recently reported $19,750 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? Meric uses the same depreciation expense for tax and stockholder reporting purposes.

Select the correct answer. a. $6,931.64 b. $6,938.24 c. $6,925.04 d. $6,918.44 e. $6,911.84

Answer #1

Sales | $ 19,750.00 | |

Less: |
||

Costs | $ 7,500.00 | |

Depreciation | $ 1,200.00 | |

EBIT | $ 11,050.00 | |

Less: Interest | $ 406.25 | =6500*6.25% |

Profit before tax | $ 10,643.75 | |

Less: Tax | $ 3,725.31 | |

Net income |
$
6,918.44 |

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