Arizona State University FIN FIN 300 Question ABuiltrite had sales of $36,000,000 last year. Cost of goods sold were calculated at 65% of sales. Builtrite’s operating expenses were…

Arizona State University FIN FIN 300 Question ABuiltrite had sales of $36,000,000 last year. Cost of goods sold were calculated at 65% of sales. Builtrite’s operating expenses were…

Question A   Builtrite had sales of $36,000,000 last year. Cost of

goods sold were calculated at 65% of sales. Builtrite’s operating expenses were $6,000,000 which included depreciation expense.  Bonds with a total par value of $12,000,000 were outstanding and had a 9% coupon rate.  Builtrite received $200,000 in dividends from stock owned and paid out $600,000 in dividends to its preferred stockholders. Builtrite sold stock that it had purchased in 2008 and realized a $350,000 capital gain.    a) -Calculate Builtrite’s taxable income and tax liability

Sales                              36,000
Cost of goods sold         23,400 (0.65*36000)
Gross profit                  12,600
operating expenses          6,000
operating profit/EBIT       6,600
interest expense              1,080 (0.09*12000)
Earning before tax            5,520
In dividend                            60 (0.30*200)
Stock income                       350 (long term capital gain)
Earning before tax             5,930
Tax (0.34)                         2,016,200 (0.34*5930000)

for the “in dividend” line, where is the 30% coming from?