A firm has EBIT of $500,000, interest expenses of $300,000, and a cooperate tax rate of 35%.
Indicate the detailed steps on how to use a FINANCIAL CALCULATOR to solve the problems.
EBIT = $500,000
Interest Expense = $300,000
Tax Rate = 35%
1.
Net Income = (500,000 - 300,000)(1 - 0.35)
Net Income = $130,000
2.
If Debt = 0,
Interest Expense = 0
Net Income = (1 - 0.35)(500,000)
Net Income = $325,000
3.
Interest Tax Saving = 0.35(Interest Expense)
Interest Tax Saving = 0.35(300,000)
Interest Tax Saving = $105,000
A firm has EBIT of $500,000, interest expenses of $300,000, and a cooperate tax rate of...
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