Question

Moose Industries has a corporate tax rate of 25%. Last year the company realized $14,000,000 in operating income (EBIT). Its annual interest expense is $1,500,000. What was the company’s net income for the year?

Answer 1

Answer:

$9,375,000

Explanation:

Given that

Corporate tax rate = 25%

EBIT = $14,000,000

Annual interest expense = $1,500,000

The computation of the net income is shown below:

Operating Income (EBIT) $14,000,000

Less: Interest Expense $1,500,000

Income before tax $12,500,000

Less: Income tax (25%) $3,125,000

Net Income $9,375,000

We simply applied the above formula to determine the net income