Hi, how do you arrive to the answer B? 31. At the end of fiscal year 2010, compa

Question

Hi, how do you arrive to the answer B?

31. At the end of fiscal year 2010, company X discloses the following income statement: Sales $6.500,000 Operating expense ($4,800,000) Interest income $600,000 Interest expense ($900,000) Tax expense ($490,000) Net profit $910,000 Company X's net interest expense after tax (NIEAT) and net operating profit after taxes (NOPAT) equal A. $585,000 and $1,105,000, respectively B. $195,000 and $1,105,000, respectively C. $300,000 and $910,000, respectively D. $300,000 and $1,210,000, respectively

Explanation / Answer

Sales $6,500,000 Less: Operating expenses -4800000 Operating Income $1,700,000 Other Income/(expenses) interest expenses -900000 Interest income 600000 Other Income/(expenses) -300000 Income from continuing operations $1,400,000 Tax expenses 490000 which is equal to 35% =490000/1400000*100 Hence Net operating Profit after tax 1700000*(1-.35) 1105000 Net Interest expenses after taxes 195000 Net interest expenses before taxes-taxes on net interest expense 300000-(300000*35%) Hence Option B is correct $195000 and $1105000 If satisfied you can rate the answer. If any doubt you can comment

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