Question

I want to double check my work to see if I did it correctly. Please compare my answers with yours, thank you.

A firm has annual sales of $338024. Earnings before interest and taxes is equal to 5.86 percent of sales. For the period, the firm paid $5728 in interest. What is the profit margin (in percent) if the tax rate is 27 percent? Answer to two decimals. 0.3

Answer 1

EBIT($338024*5.86%)	$19808.2064
Less:interest	($5728)
EBT	$14080.2064
Less:tax@27%($14080.2064*27%)	($3801.655728)
Net income	$10278.55067

Hence profit margin=net income/sales

=$10278.55067/$338024

=3.04%(Approx).