Question

Fraser Corporation has announced that its net income for the year ended June 30, 2017, was 1,447,504. The company had EBITDA of 4,936,348, and its depreciation and amortization expense was equal to 1,160,777. The company’s average tax rate is 21 percent. What was its interest expense? Round to the nearest whole number.

Answer 1

Answer:

$1,943,287.46

Explanation:

The computation of the interest expense is shown below:

Earning before interest and tax  = Earning before tax + interest expense

where,

Earning before tax

= Net income ÷ 1 - tax rate

= $1,447,504 ÷ 1 - 0.21

= $1,447,504 ÷ 0.79

= $1,832,283.54

And, the

EBIT = EBITDA - depreciation and amortization expense

= $4,936,348 - $1,160,777

= $3,775,571

So, the interest expense is

$1,832,283.54 = $3,775,571 + interest expense

So, the interest expense is

= $1,943,287.46