The Nelson's times-interest-earned (TIE) ratio = Earnings before interest and taxes (EBIT)/Annual interest expenses
Where,
Earnings before interest and taxes (EBIT) =?
Annual interest expenses = $203,345
Times-interest-earned (TIE) ratio = 3.50
Therefore,
3.50 =EBIT/$203,345
Or Earnings before interest and taxes (EBIT) =3.50 * $203,345 = $711,707.50
Now Nelson’s net income = Earnings before interest and taxes (EBIT) - Annual interest expenses – Taxes
= $711,707.50 - $203,345 – (taxable income * 21%)
= $508,362.50 – ($508,362.50 * 21%)
=$508,362.50 - $106,756.125
= $401,606.375
Therefore Nelson’s net income is $401,606.375
Question 22 8 pt Nelson Industries pays income tax equal to 21 percent of taxable income...
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