Computing interest tax savings

(Preferred stock valuation)
June 29, 2019
Computing interest tax savings
June 29, 2019

(Computing interest tax savings) Dharma Supply has earnings before interest and taxes (EBIT) of $512,000, interest expenses of $349 comma 000349,000, and faces a corporate tax rate of 3535 percent.

a. What is Dharma Supply’s net income?

b. What would Dharma’s net income be if it didn’t have any debt (and consequently no interest expense)?

c. What are the firm’s interest tax savings?

a. Dharma Supply’s net income is $nothing.

  (Round to the nearest dollar.)

b. If it didn’t have any debt, Dharma Supply’s net income is $nothing.

(Round to the nearest dollar.)

c. The firm’s interest tax savings are $nothing.

(Round to the nearest dollar.)

 
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