Question

The following information is given:

Income before interest and tax $20,000

Debt capital $100,000

Interest on debt capital 5%

Tax rate 30%

What is the amount of tax paid for the year?


The amount of tax paid for the year is $ [blank]

Answer 1

The amount of tax paid for the year is $4,500

Step-by-step explanation:

Income before interest and tax $20,000

Interest Earn (Paid) $5,000

Pre-tax profit $15,000

Tax $4,500

Profit $10,500