Last year Tiemann Technologies reported $10,500 of sales, $6,250 of operating costs other than depreciation, and $1,300 of depreciation. The company had no amortization charges, it had $5,000 of bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 25%. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $750. By how much will net after-tax income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting purposes. a. - 562.50 b. - 620.16 c. - 534.38 d. - 590.63 e. - 651.16

Question

Paige Mccoy

Business

23 November, 14:06

Last year Tiemann Technologies reported $10,500 of sales, $6,250 of operating costs other than depreciation, and $1,300 of depreciation. The company had no amortization charges, it had $5,000 of bonds that carry a 6.5% interest rate, and its federal-plus-state income tax rate was 25%. This year's data are expected to remain unchanged except for one item, depreciation, which is expected to increase by $750. By how much will net after-tax income change as a result of the change in depreciation? The company uses the same depreciation calculations for tax and stockholder reporting purposes. a. - 562.50 b. - 620.16 c. - 534.38 d. - 590.63 e. - 651.16

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Answers (1)

Know the Answer?

Ayanna Stephenson · Answer 1

a.-$562.5

Explanation:

Deprecation will reduce net income by ($750)

The tax impact will be 750*25% = $187.5

Net impact on net income after tax ($562.5)

The answer is a.-$562.5