Question

Pharrell, Inc., has sales of $586,000, costs of $272,000, depreciation expense of $70,500, interest expense of $37,500, and a tax rate of 40 percent.What is the net income for this firm? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Answer 1

Answer: Net income for this firm = $123,600

Explanation:

Given that,

Sales = $586,000

Costs = $272,000

Depreciation expense = $70,500

Interest expense = $37,500

Tax rate = 40 percent

Pre tax income = Sales - costs - Depreciation expense - Interest expense

                         = $586,000 - $272,000 -  $70,500 - $37,500

                         = $206,000

After tax income = Pre tax income × (1 - Tax rate)

                            = $206,000 × (1 - 0.4)

                            = $206,000 × 0.6

                            = $123,600

Therefore,

Net income for this firm = $123,600