Problem 327 Mount Hebron Electrical Companys financial state

Problem 3.27 Mount Hebron Electrical Company\'s financial statements indicated that the company had earnings before interest and taxes of $673,000. The interest rate on its $856,000 debt percent. Calculate the taxes the company is likely to owe. What are the marginal and average tax rates for this company? (Round total taxes payable to 2 decimal places, e.g. 15.25 and other answers to 0 decimal places, e.o. 17%.) Total taxes payable s Marginal tax rate Average tax rate Click if you would like to Show Work for this question: Open Show Work

Solution

EBIT = 673000 Interest = 856000*8.95%=76612 EBT=673000 - 76612 = 596388 Tax = -50000 15% 7500 50001-75000 25% 6250 75001-100000 34% 8500 100001-335000 39% 91650 335001-596388 34% 88872   Total tax payable 202772 Marginal tax rate = 34% Average tax rate = 202772/596388 = 34%