A firm has interest expense of $145,000, preferred dividends of $25,000, and a tax rate of...
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A firm has interest expense of $145,000, preferred dividends of $25,000, and a tax rate of 21 percent. The firm's financial breakeven point is ________.
$201,646
$145,000
$176,646
$25,000
Homework Answers
Option (c) is correct
Financial break even point = Preferred dividend / (1 - tax rate) + Interest expense
Financial break even point = $25000 / (1 - 21%) + $145000
Financial break even point = $25000 / 79% + $145000
Financial break even point = $31645.57 + $145000 = $176646.
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