Answer:
(A) 32.83%
Explanation:
- <em>Sales and Costs are given as $ 843,800 and $609,900</em> respectively. From this, we can find <em>Earning before Interest, Tax and Depreciation (EBITDA).</em>
<em>EBITDA= Sales - Costs</em>
= $ 843,800 - $ 609,900
= $ 233,900
2. We get <em>EBITDA</em> of $ 233,900. From this we have to deduct depreciation first and then interest amount, both of which are given in the problem.
<em>EBITDA - Depreciation</em>= $ 233,900 - $ 76,400
= $ 157,500
We get <em>Earning before Interest and Tax (EBIT)</em> of $ 157,500.
From the <em>EBIT</em>, we will deduct <em>interest amount</em> of $ 38,200.
Hence, <em>Earning / Profit before Tax</em> will be <em>EBIT - Interest</em>.
<em>Profit before Tax</em> = $ 157,500 - $ 38,200
= $ 119,300
3. Let us assume <em>tax </em>payment<em> </em>of $ <em>X</em>. We have found <em>Profit Before Tax</em> (<em>PBT</em>) of $ 119,300. From <em>PBT</em> and <em>tax </em>payment, we can find <em>Profit After Tax</em> (<em>PAT</em>) as follows -
<em>PAT= PBT - Tax paid</em>
= $ (<em>119,300 - X </em>)
4. We are given <em>dividends</em> of $ 18,000. Dividends for the equity shareholders are payable on PAT. If we minus dividends from PAT, we will get Retained Earnings.
Thus, <em>Retained Earnings = PAT - Dividends</em>
= $ 119,300 - $ X - $ 18,000
= $ <em>101,300 - X</em>
5. <em>Retained Earnings</em> are given in the problem as $ 62,138.
Hence,
$ 101,300 - X = $ 62,138
X = $ 101,300 - $ 62,138
<em>X= $ 39,162</em>
6. Thus, <em>taxes</em> of $ 39,162 are paid. These taxes are paid on <em>Profit Before Tax (PBT)</em>. Recall that <em>PBT</em> was $ 119,300 as calculated in Step 2.
Hence, <em>tax</em> paid will be -
<em>Tax % ( let's say T%) * PBT = Tax Amount</em>
T% = Tax Amount / PBT
= $ 39,162 i.e. X / $ 119,300
= 0.32826
= <em>32.83 % </em>(approx.)