Chartworth Associates' financial statements indicated that the company had EBITDA of $3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was 7.5 percent. Calculate the amount of tax the company is likely to owe. The corporate tax rate is 30%.

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Quizplus · Accepted Answer

To calculate the tax, first find the EBIT by subtracting depreciation from EBITDA: $3,145,903 - $633,000 = $2,512,903. Then, subtract interest expense ($1.25 million * 7.5% = $93,750) from EBIT to get taxable income: $2,512,903 - $93,750 = $2,419,153. Finally, calculate the tax: $2,419,153 * 30% = $725,746.

Chartworth Associates' Financial Statements Indicated That the Company Had EBITDA