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Mirha Corp recently reported sales of $950,000. The company also reported cost of goods sold of...

Mirha Corp recently reported sales of $950,000. The company also reported cost of goods sold of $450,000, operating expenses of $250,000, and depreciation and amortization of $40,000. The firm has $2 million of outstanding bonds with a 5% coupon rate. If the company faces a 21% tax rate, what is its net income?

Question 31 options:

$65,900

$86,900

$118,500

$157,605
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Answer #1

Sales = $950,000

COGS = $450,000

Operating expenses = $250,000

Depreciation & Amortization = $40,000

EBIT = Sales - COGS - Operating expenses - Depreciation & Amortization = $210,000

Interest expense = $2,000,000 * 5% = $100,000

Earnings before tax = $210,000 - $100,000 = $110,000

Tax rate = 21%

Net Income = $110,000 * (1 - 21%) = $86,900

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