EBIT is $10,000 and interest expense is $4,000.If the tax rate is 30%,what is the net income?
A)$3,800
B)$4,200
C)$5,200
D)$8,400

Question

Quizplus · Accepted Answer

Net income can be calculated as follows:
EBIT - Interest expense = EBT
EBT * Tax rate = Net income
So, using the given numbers:
EBIT - Interest expense = EBT
$10,000 - $4,000 = $6,000
$6,000 * 0.3 = $1,800
$6,000 - $1,800 = $4,200
Therefore, net income is $4,200, option B.

EBIT Is $10,000 and Interest Expense Is $4,000