Question

Draiman Inc. had sales of $596,000 costs of $262,000, depreciation expense of $65,500, interest expense of $32,500 and a tax rate of 40 percent. What is the net income for this firm?

Answer 1

The net income for Draiman Inc. is $141,600, calculated by deducting costs, depreciation, interest, and taxes from the total sales.

Step-by-step explanation:

To calculate the net income for Draiman Inc., we need to consider the company's revenues, costs, depreciation, interest, and taxes. The net income can be calculated using the following steps:

1. Subtract costs and depreciation from sales to calculate earnings before interest and taxes (EBIT).
2. Subtract interest from EBIT to get earnings before taxes (EBT).
3. Apply the tax rate to EBT to calculate taxes owed.
4. Finally, subtract taxes from EBT to determine the net income.

Following these steps:

• Sales: $596,000
• Costs: -$262,000
• Depreciation: -$65,500
• Interest Expense: -$32,500
• Tax Rate: 40%

EBIT = Sales - Costs - Depreciation = $596,000 - $262,000 - $65,500 = $268,500

EBT = EBIT - Interest Expense = $268,500 - $32,500 = $236,000

Taxes = EBT * Tax Rate = $236,000 * 0.40 = $94,400

Net Income = EBT - Taxes = $236,000 - $94,400 = $141,600

Therefore, the net income for Draiman Inc. is $141,600.