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 ________.
A)$25,000
B)$201,646
C)$176,646
D)$145,000

Question

Quizplus · Accepted Answer

The financial breakeven point is calculated by adding the interest expense and the preferred dividends, adjusted for taxes. The formula is: Financial Breakeven = Interest Expense + (Preferred Dividends / (1 - Tax Rate)). Here, it is $145,000 + ($25,000 / (1 - 0.21)) = $176,646.

A Firm Has Interest Expense of $145,000,preferred Dividends of $25,000,and