Question

hudson company reports in its year 7 annual report, sales of $398 million, long-term debt of $32 million, and interest expense of $1,176,000 . if sales are projected to increase by 4% next year, projected interest expense for year 8 will be: select one: a. $1,450,080 b. $1,128,960 c. $1,176,000 d. $1,223,040 e. none of these are correct

Answer 1

To calculate the projected interest expense for Year 8, divide the interest expense by the sales in Year 7, then multiply by the projected sales increase of 4%. The projected interest expense for Year 8 is $1,176,000.

Step-by-step explanation:

To calculate the projected interest expense for Year 8, we need to use the information provided and apply the projected sales increase of 4%. First, we calculate the interest expense as a percentage of sales in Year 7 by dividing the interest expense by the sales amount. Then, we apply this percentage to the projected sales in Year 8 to find the projected interest expense.

The formula is: Projected interest expense = Projected sales in Year 8 * (Interest expense / Sales in Year 7). Substituting the values, we get: Projected interest expense = $398 million * ($1,176,000 / $398 million).

Simplifying this expression, we find that Projected interest expense for Year 8 is equal to $1,176,000.