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24 August, 14:14

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.)

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  1. 24 August, 14:42
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    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
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