Please Help :(?

Question

A firm has Owner's Equity of $2,000,000; debt of $500,000 that must pay interest of
10%; and total inventories of $250,000. It also has sales of $5,000,000 and an EBIT of
$500,000. If it pays taxes of 40%, what is its NIAT?

Answer 1

EBIT = Earnings Before Interest & Taxes = $500,000.
Interest = Debt x 10% = $500,000 x 10% = $50,000.
Taxable income = EBIT - Interest =$500,000 - $50,000 = $45,000.
Tax = Taxable income x 40% = $45,000 x 40% = $18,000.
NIAT = Net income After Tax = $45,000 - $18,000 = $27,000.

Note: Your accounting homework is NOT personal finance.