menu
bartleby
search
close search
Hit Return to see all results

In 2018, Beta Corporation earned gross profits of $720,000.a. Suppose that Beta was financed by a combination of common stock and $1.14 million of debt. The interest rate on the debt was 8%,and the corporate tax rate in 2018 was 21 %. How much profit was available for common stockholders after payment of interest andcorporate taxes? (Do not round intermediate calculations. Enter your answer in dollars not millions and round your answer to thenearest whole dollar amount.)Profit available to common stockholders

Question
In 2018, Beta Corporation earned gross profits of $720,000.
a. Suppose that Beta was financed by a combination of common stock and $1.14 million of debt. The interest rate on the debt was 8%,
and the corporate tax rate in 2018 was 21 %. How much profit was available for common stockholders after payment of interest and
corporate taxes? (Do not round intermediate calculations. Enter your answer in dollars not millions and round your answer to the
nearest whole dollar amount.)
Profit available to common stockholders
help_outline

Image Transcriptionclose

In 2018, Beta Corporation earned gross profits of $720,000. a. Suppose that Beta was financed by a combination of common stock and $1.14 million of debt. The interest rate on the debt was 8%, and the corporate tax rate in 2018 was 21 %. How much profit was available for common stockholders after payment of interest and corporate taxes? (Do not round intermediate calculations. Enter your answer in dollars not millions and round your answer to the nearest whole dollar amount.) Profit available to common stockholders

fullscreen
check_circleAnswer
Step 1

Calculation of net profits:

Excel spreadsheet:

 

A
Amount
Particulars
(S)
$1.140.000
1
2 Debt
3 Gross profit
4 Less: Interest on debt
$720,000
$91,200
$628,800
$132,048
$496,752
5 EBIT
6 Less: Taxes @21%
7 EAT or Net profit
help_outline

Image Transcriptionclose

A Amount Particulars (S) $1.140.000 1 2 Debt 3 Gross profit 4 Less: Interest on debt $720,000 $91,200 $628,800 $132,048 $496,752 5 EBIT 6 Less: Taxes @21% 7 EAT or Net profit

fullscreen
Step 2

Excel workings:

...
A
Amount
Particulars
(S)
=1.14*1000000
|720000
4 Less: Interest on debt =B2*0.08
-B3-B4
6 Less: Taxes@21% =B5*0.21
7 EAT or Net profit B5-B6
1
2 Debt
3 Gross profit
5 EBIT
help_outline

Image Transcriptionclose

A Amount Particulars (S) =1.14*1000000 |720000 4 Less: Interest on debt =B2*0.08 -B3-B4 6 Less: Taxes@21% =B5*0.21 7 EAT or Net profit B5-B6 1 2 Debt 3 Gross profit 5 EBIT

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in

Business

Finance

Related Finance Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Grill Works and More has 8 percent preferred stock outstanding that is currently selling for $49 a s...

A: Calculation of Cost of Preferred Stock:

question_answer

Q: If the interest rate per day is 0.014%, then what is the annual rate?

A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money...

question_answer

Q: The manufacturer of a product that a variable cost of $2.50 per unit and total fixed cost of $125,00...

A: The manufacturer of a product that a variable cost of $2.50 per unit and total fixed cost of $125,00...

question_answer

Q: Kaye's Kitchenware has a market/book ratio equal to 1.200. The firm's stock price is 12.30 USD/share...

A: Market/book ratio of equity = 1.200Hence, MVE / BVE = 1.2Current stock price, P = $ 12.30 / shareNos...

question_answer

Q: A bond for the Chelle Corporation has the following characteristics: Maturity 12 years Coupo...

A: Parts a, b and c can be answered as per our policies. For solution to part d, kindly respost this qu...

question_answer

Q: ackis planning for his son's college education to begin eightyears from today. He estimates the year...

A: First we need to calculate the present value of an ordinary annuity in year 7 as the withdrawal star...

question_answer

Q: A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yiel...

A: Calculation of market value of bonds: Excel spreadsheet:

question_answer

Q: UBTECH Robotics is expected to generate the following free cash flows over the next fiveyears. After...

A: Let Ci be the free cash flow (FCF) for year i.Please note that the question talks about forecast of ...

question_answer

Q: Larry's Bank buys 58 bonds of the Puppet House Corp. through a broker.  The bonds pay 10 percent ann...

A: Part A.Characteristics of the bond:Payment frequency = Semi annual, Period = Half year.Periodic coup...

Sorry about that. What wasn’t helpful?