Rogue Corp.has sales of $4,250,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.What is Rogue's tax liability?

Question

Quizplus · Accepted Answer

1. First, we need to calculate the earnings before interest and taxes (EBIT):
EBIT = Sales - COGS - Operating Expenses
EBIT = $4,250,000 - $2,500,000 - $600,000
EBIT = $1,150,000
2. Next, we need to calculate earnings before taxes (EBT):
EBT = EBIT - Interest Expense
EBT = $1,150,000 - $250,000
EBT = $900,000
3. Finally, we can calculate the tax liability:
Tax Liability = EBT x Tax Rate
Tax Liability = $900,000 x 0.4
Tax Liability = $360,000