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A firm's operating profit margin is 20% with an EBIT of $1
A firm's operating profit margin is 20% with an EBIT of $1.5 million and sales of $5 million. If it has no debt, how much did the firm pay in taxes?
|
A. |
$50,000 |
|
B. |
$300,000 |
|
C. |
$350,000 |
|
D. |
$500,000 |
Expert Solution
Operating profit Margin = 20%
Sales = $5 milion
Operating profit = Sales*Operating profit Margin
Operating profit = $5 million*20% = $1 million
EBIT = $1.5 million
Taxes paid = EBIT - Operating profit
Taxes paid= $1.5 million - $1 million
Taxes paid= $0.50 million or $500,000
Option D
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