Question

Meric Mining Inc. recently reported $17,500 of sales, $7,500 of operating costs other than depreciation, and $1,200 of depreciation. The company had no amortization charges, it had outstanding $6,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. How much was the firm's net income after taxes

Answer 1

$6,295.31

Step-by-step explanation:

Net income=earnings before tax *(1-tax rate)

earnings before tax=sales-operating costs- depreciation-interest expense

sales=$17,500

operating costs=$7,500

depreciation=$1,200

interest expense=bonds value*interest rate=$6,500*6.25%=$406.25

earnings before tax=$17,500-$7,500-$1,200-$406.25=$8,393.75

tax rate=25%

net income after taxes=$8,393.75*(1-25%)

net income after taxes=$6,295.31