Question

Cullumber Corporation has announced that its net income for the year ended June 30, 2017, was $1,353,412. The company had EBITDA of $4,948,000, and its depreciation and amortization expense was equal to $1,128,000. The company's average tax rate is 34 percent. What was its interest expense

Answer 1

See below

Step-by-step explanation:

Net income = $1,353,412

Tax rate is 34% hence the company's EBT amount is calculated as

EBT = $1,353,412 / 0.66 = $2,050,624.24

Add back Depreciation and amortization to the EBT

= $2,050,624.24 + $1,128,000

= $3,178,624.24

The difference between the above and EBITDA amount will be the interest expense for the year

= $4,948,000 - $3,178,624.24

= $1,769,375.76

Therefore, the interest expense is $1,769,375.76