Question

Alafaya Inc. manufactures a complete line of watches for independent merchants. Last year the firm’s sales...

Alafaya Inc. manufactures a complete line of watches for independent merchants. Last year the firm’s sales were $3,227,610, whereas variable costs were $2,353,560.

They also had $3 million in bonds outstanding with a coupon rate of 7% last year.

With a corporate tax rate of 34% and net income (after-tax) of $354,453 in the last year, what was the firm’s fixed cost?

Group of answer choices

$127,000

$430,111

$309,597

$247,000

$337,000

Homework Answers

Answer #1

Using Goal Seek in Excel, we can answer this question:

Year
Sales $    3,227,610
Variable cost $    2,353,560
Fixed Costs $        127,000
EBIT $        747,050
Interest $        210,000
EBT $        537,050
Tax @34% $        182,597
PAT $        354,453
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