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If profit after tax and interest is $400,000, interest expense is $50,000 and taxation expense is $84,000, profit before interest and tax is:$291,000$484,000$450,000$534,000

Question

If profit after tax and interest is 400,000,interestexpenseis400,000, interest expense is 50,000 and taxation expense is 84,000,profitbeforeinterestandtaxis:84,000, profit before interest and tax is:291,000484,000484,000450,000$534,000

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Solution 1

To calculate profit before interest and tax (also known as Earnings Before Interest and Tax or EBIT), you need to add back the interest and tax expenses to the profit after tax and interest.

  1. Start with the profit after tax and interest, which is $400,000.

  2. Add the interest expense to the profit after tax and interest. The interest expense is 50,000.So,50,000. So, 400,000 + 50,000=50,000 = 450,000.

  3. Add the taxation expense to the result from step 2. The taxation expense is 84,000.So,84,000. So, 450,000 + 84,000=84,000 = 534,000.

So, the profit before interest and tax is $534,000.

This problem has been solved

Solution 2

To calculate profit before interest and tax (also known as Earnings Before Interest and Tax or EBIT), you need to add back the interest and tax expenses to the profit after tax and interest.

  1. Start with the profit after tax and interest, which is $400,000.

  2. Add the interest expense to the profit after tax and interest. The interest expense is 50,000.So,50,000. So, 400,000 + 50,000=50,000 = 450,000.

  3. Add the taxation expense to the result from step 2. The taxation expense is 84,000.So,84,000. So, 450,000 + 84,000=84,000 = 534,000.

So, the profit before interest and tax is $534,000.

This problem has been solved

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