Question 1 Completion with Options:
A. used equipment
B. storage warehouse
C. land for future building site
D. new office furniture
E. apartment complex
F. new delivery truck
Answer:
1. The assets purchased in the current year that are eligible to be expensed under Section 179 assuming the cost does NOT exceed the limitations are:
A. used equipment
D. new office furniture
F. new delivery truck
2. $561,000 is the maximum to be expensed with an adjusted basis of 100% for MACRS
Explanation:
There is a maximum deduction of $1,050,000 under section 179. The section affords eligible taxpayers the opportunity to reduce their tax burden in the first year that they purchase eligible properties.
Given D: Annual use of a particular item, in number of items per year Q: Number of items ordered in one purchase order, in units SS: Safety stock, in units L: Lead time, in fraction of a year I: Current inventory on hand, units Reorder point can be expressed as ______ (x below denotes the multiplication sign).
Answer:
D×L + SS
Explanation:
The reorder point (ROP) is the inventories or stock level for a certain product that, when attained, initiates the reordering of more inventories. The lead time it will take to refill inventories is taken in when computing the reorder points for different stock holding units. This ensures inventory levels do not approach zero.
Computing reorder points necessitates a thorough understanding of purchase habits over a specific time period. The more ROP you compute for each product, the better you'll be able to anticipate future demand and guarantee you're using the reorder quantity calculation appropriately.
From the given information in the question:
The reorder point can be determined by using the formula:
Reorder point = Demand (D) at the point of leas time (L) with the addition of safety stock (SS)
Reorder point = D×L + SS
Kite Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (3,000 units) $ 180,000
Variable expenses 108,000
Contribution margin 72,000
Fixed expenses 62,400
Net operating income $ 9,600
The contribution margin ratio is closest to:______.
a. 33%
b. 40%
c. 60%
d. 67%
Answer:
b. 40%
Explanation:
Contribution margin ratio = Contribution / Sales x 100
where,
Contribution = Sales - Variable Costs
= $180,000 - 108,000
= $72,000
therefore,
Contribution margin ratio = $72,000/ $180,000 x 100
= 40 %
thus,
The contribution margin ratio is closest to 40 %.
Cullumber Enterprises has total current assets of $345,002 and fixed assets of $466,306. The company also has long-term debt of $287,400, $100,000 in its common stock account, and retained earnings of $187,570. What is the value of its total current liabilities
Answer: $236,338
Explanation:
The accounting equation is:
Assets = Equity + Liabilities
Assets = Fixed assets + Current Assets
Equity = Common stock + Retained earnings
Fixed assets + Current Assets = Common stock + Retained earnings + Long term debt + Current liabilities
466,306 + 345,002 = 100,000 + 187,570 + 287,400 + Current liabilities
811,308 = 574,970 + Current liabilties
Current liabilities = 811,308 - 574,970
= $236,338
One way marketing intermediaries improve marketing efficiency is by reducing the number of exchange relationships necessary to move goods through the channel of distribution.
a) true
b) false
we flew to ___Dublin Airport in ___ Ireland. correct determiners
Answer:
we flew to the Dublin Airport in the Ireland
The demand curve for Widgets is given by QD = 6000 - 2y - 200p + 30pG, where QD is the quantity of widgets demanded, y is the per capital income and pG is the price of Gizmos. An increase in per capital income will cause A) demand shifts left. Can you explain this step by step. How do i go about solving such problems?
Answer:
An increase in y which is per capital income will cause demand curve to shift left.
Explanation:
In theory of demand, the following are two categories that can happen to the demand curve:
1. Change in quantity demanded: This is a movement along the demand curve which is caused only by the change in the price of the commodity. When the price falls, there will be a movement to the right along the demand curve indicating an increase in quantity demanded. But when the price increases, there will be a movement to the left along the demand curve indicating a decrease in quantity demanded.
2. Change in demand: This is a bodily shift of demand curve caused by others factors affecting the demand of a commodity except price. The demand curve will shift to the right when there is an increase in any of the factors that has positive effect on the demand for the commodity to indicate an increase in demand for the commodity. However, the demand curve will shift to the left when there is an increase in any of the factors that has negative effect on the demand for the commodity to indicate a decrease in demand for the commodity.
From the question, y falls into the second category which is Chang in Demand. Since the sign before 2y in the demand curve for Widgets is negative, that implies that y as a factor affecting the demand for Widgets has a negative effect on the demand for Widgets. Therefore, an increase in y which is per capital income will cause demand curve to shift left.
hãy lựa chọn 1 công ty sử dụng dịch vụ nghiên cứu của marketing của các nhà cung cấp bên ngoài.
1. tìm hiểu lý do công ty phải thuê ngoài
2. những tổ chức nào đã cung cấp dịch vụ marketing cho công ty?
3. công ty thuê một phần hay thuê toàn bộ các hoạt động nghiên cứu marketing
Answer:
may I know which language
g Suppose you are thinking of loaning out some money. You would like to get a real rate of return of 10% on your loan and the rate of inflation is anticipated to be 4%. What interest rate should you charge on your loan
Answer:
14%
Explanation:
The contribution margin ratio is:_______.
a. contribution margin divided by sales.
b. sales divided by variable expenses.
c. sales divided by contribution margin.
d. sales divided by fixed expenses.
Answer:
a. contribution margin divided by sales
Explanation:
The contribution margin ratio is the relationship between contribution and sales. The contribution margin ratio is determined by dividing contribution with the sales amount.
33. ĐỘ CO GIÃN CỦA CẦU Khi một mặt hàng được
định giá p đô-la mỗi đơn vị, cầu của người tiêu
dùng là q đơn vị, trong đó và q liên hệ với nhau
bởi phương trình q+ 3pq = 22.
a. Tính độ co giãn của cầu theo giá đối với mặt
hàng này.
b. Với đơn giá là $3, cầu là co giãn, không co giãn
hay co giãn đơn vị?
Answer:
yyyyyyyyyyyuuuuuuuuu
Red Co. recorded a right-of-use asset of $140,000 in a 10-year finance lease. Payments of $22,784 are made annually at the end of each year. The interest rate charged by the lessor and known by Red was 10%. The balance in the lease payable after two years will be: (Round your final answer to the nearest whole dollar.)
Answer: $121554
Explanation:
Lease liability = $140,000
Less: Lease liability in 1st year= $8784
Lease payable after one year = $131216
Less: Lease liability in 2nd year = $9662.40
Lease payable after 2nd year = $121553.60 = $121554
Note:
Lease liability in 1st year:
= $22,784 - (10% × $140000)
= $22784 - $14000
= $8784
Lease liability in 2nd year:
= $22784 - (10% × $131216)
= $22784 - $13121.60
= $9662.40
As Laura checks items off her meeting agenda and various individuals provide input and insight, she beams at her team. She is so proud of the work they do at her clinic every day. They have always been a very high performing team, and for that, she has always been thankful.
Select the statement that is true about high performing teams.
a) High performing teams are able to come up with more rapid solutions and have increased productivity.
b) High performing teams never face obstacles.
c) High performing teams should only have about 4-6 members.
d) High performing teams are most effective when all members share the same skills and experience.
Answer: a) High performing teams are able to come up with more rapid solutions and have increased productivity.
Explanation:
A high performing team is as the term implies, one that is productive. To be productive one has to be able to come up with solutions to problems as fast as possible and implement those solutions so as to continue or even increase production.
A high performing team is one that would do the above. Laura's team provides inputs and insights which means they come up with solutions and they also show up to work every day to be productive. They are indeed a high performing team.
If you are a director of a tea company, what will you do with functional management (POLC)? You are required to make a detail plan which explains clearly about functional management.
Answer:
Make someone else director
Explanation:
I would be too lazy to do that. ;)
Four fundamental factors affect the cost of money:
1. The return that borrowers expect to earn on their investments
2. The preference of savers to spend their income in the current period rather than delay their consumption until some future period
3. The risks associated with the investment
4. Expected inflation
Consider the following statements that address these factors, and indicate if you think each statement is true or false.
Statement
True
False
Investments providing cash flows that are more likely to equal their expected value are said to exhibit more risk.
The actual relationship between the risk-free rate of return (r*r*) and the expected future inflation rate or inflation premium (IP) is actually multiplicative—that is, [(1 + rRFrRF) x (1 + IP)] – 1—but it is often simplified to reflect an additive relationship.
All things being equal, rational savers and investors prefer to invest in an asset that provides a 12% return rather than one that provides an 8% return.
All things being equal, savers and investors prefer more risk to less risk and prefer lower risk premiums on projects exhibiting higher levels of risk.
On average and everything else held constant, an investment that can provide a 4% return should attract more investment capital from savers/investors than an otherwise identical investment that can generate a 12% return.
Answer:
True statement is:
All thing being equal, savers and investors prefer more risk to less risk and prefer lower risk premiums on projects exhibiting higher levels of risk.
Explanation:
Investors wish to receive less risk and more return. They prefer from more risk to lesser risk and receive risk premium on project that exhibit higher level of risk and delayed compensation. A project with 12% return will be more riskier than a project with 8% return. Rate of return increases as the level of risk increases.
The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the indirect method.
a. True
b. False
Answer:
a. True
Explanation:
When we have to adjust and converted the net income into the cash basis the gain is subtracted and losses are added to the net income in the operating activities section of the cash flow statement
Since there is the gain or loss from the retirement of the bonds so the same should be deducted or added to the net income as the case may be
Therefore the correct option is a.
In spite of people living longer and healthier lives, stereotypes about older workers being hard to manage and slow to adapt to new technologies still persist. How do the media contribute to and reinforce these perceptions?
(your answer must be a minimum of 200 words)
Answer:
I think although older workers may need a rather difficult time learning new technological concepts, nothing takes from them the dedication and commitment they will bring back any company.
Explanation:
The media contributes to its idea pretty vastly. If the media promoted more within the older generation it'll help reinforce the commitment and drive of the elderly. They do not go to work, they prefer to work. they need to remain active, they need to continue doing what they love. sure being retired is great but they get bored. Not many of us just want to remain home, especially from that operation. The baby boomers and generation y workers want and wish for social interaction and need to continue mental stimulation.
Darkover Inc., as part of its strategic planning process, is considering making some policy changes. What effect (i.e. Increase, Decrease, No Effect) would each the following changes have on Darkover's Net Cash Flow from Operating Activities? Assume that in each case, the change only affects the account or accounts mentioned (i.e. all other accounts are not changed by the action).
Question Completion:
_____(a) Increase investment in new plant and equipment.
_____(b)Change the collections policy to insure that receivables are collected sooner.
_____(c)Change inventory policy to increase the amount of raw materials kept on hand (work in process and finished goods inventory will remain unchanged).
_____(d)Sell long term bonds and use the proceeds to reduce notes payable
._____(e) Begin paying all employees every week instead of every two week, effectively decreasing accruals.
_____(f)Change accounts payable policy to pay bills in 20 days instead of 10 days.
Answer:
Darkover Inc.
Effects of Changes on Darkover's Net Cash Flow from Operating Activities:
_No Effect____(a) Increase investment in new plant and equipment.
Increase_____(b) Change the collections policy to insure that receivables are collected sooner.
Decrease_____(c) Change inventory policy to increase the amount of raw materials kept on hand (work in process and finished goods inventory will remain unchanged).
Decrease_____(d) Sell long term bonds and use the proceeds to reduce notes payable
Decrease_____(e) Begin paying all employees every week instead of every two week, effectively decreasing accruals.
Increase_____(f) Change accounts payable policy to pay bills in 20 days instead of 10 days.
Explanation:
Darkover's net cash flow from operating activities is the result of accumulating the cash inflows and outflows from its operating activities. Operating activities are the normal activities that Darkover carries out from which it earns its revenues and incurs related expenses. They are the day-to-day activities through which the mission of the entity is carried out.
"All three levels are required to run an organization or a business smoothy"Justify the statement.
Answer:
"All three levels are required to run an organization or a business " according to my point of view it is true without anyone levels (sector) business or organization not imagine to run
You manage an equity fund with an expected risk premium of 13% and a standard deviation of 44%. The rate on Treasury bills is 6.6%. Your client chooses to invest $90,000 of her portfolio in your equity fund and $60,000 in a T-bill money market fund. What is the expected return and standard deviation of return on your client’s portfolio? (Round your answers to 2 decimal places.)
Answer and Explanation:
The computation of the expected return and the standard deviation is given below:
the expected return is
= $90,000 × 13% + $60,000 × 6.6%
= $15,660.00
And,
standard deviation of return is
= $90,000 × 13% × 44% + $60,000 × 6.6%
= $5,148 + $3,960
= $9,108.00
In this way it should be calculated
A popular hotel has continued to lose business in its room service food sales over the last five years. Using the Six Sigma DMAIC process explain what you would do in each step of the process to improve the sales - provide relevant, practical details. What statistics would you apply and why?
The correct answer to this open question is the following.
Using the Six Sigma DMAIC process, I will explain what I would do in each step of the process to improve the sales.
DMAIC stands for Define, Measure, Analyze, Improve, and control.
What I would do first is, of course, define the nature of the problem. To define exactly what is the root of the drop in sales in the hotel. That would allow me to establish proper goals and define a strategy to implement. If a need to do surveys to customers or unsatisfied clients, I would do that. Listening to customer feedback would provide the necessary information.
Then, I have to measure the performance of my employees. Monitoring and evaluate the productivity of the people who work in the organization.
I have to analyze if the productivity ratio of each employee to know if they are performing to the maximum of their capabilities.
In this case, I could use a Pareto chart or the 80-20 rule, to assess productivity in the company.
I have to pay attention to the causes of poor performance and poor quality service. There is an interesting analysis called Root Cause Analysis (RCA) that can be useful in this case.
Once identified and eliminated the root or causes of the problems, then it comes de Improve the process to enhance the performance in every area of the organization. I would have to get people on the same page and focus on one problem at a time to doing things right.
Another model that could be useful in this scenario would be Design of Experiments, commonly known as DOE, which helps resolve complex issues
Finally, the control of everything implementation and solution to confirm it has been established the right way with the desired results. This could be part of the continuing Quality Control process- The poke yoke system would be a good option to be contemplated.
JOHNSON HAS THE FOLLOWING DATA REGARDING AN EXCHANGE OF LAND: (ASSUME THE EXCHANGES LACKS COMMERCIAL SUBSTANCE) OLD LAND FMV 580,000 OLD LAND COST 430,000 NEW LAND FMV 493,000 CASH RECEIVED 87,000 REQUIRED: HOW MUCH GAIN WILL JOHNSON RECOGNIZE ON THE EXCHANGE
Answer: No gain or loss will be recognized since the exchange lacks commercial substance.
Explanation:
Based on the information given, the amount of gain that John will recognize on the exchange will be nothing.
In this case, we are given the information that the exchange lacks commercial substance. Commercial substance refers to the transaction which brings about the change in the cash flow of the entity.
In this case, since there isn't ant commercial substance involved, then there will be no gain or loss recognized.
Kaluzniak Corporation leased equipment to Moeller, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,137 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,000, a book value of $5,000, and Kaluzniak expects a residual value of $4,500 at the end of the lease term. Kaluzniak set the lease payments with the intent of earning a 6% return, though Moeller is unaware of the rate implicit in the lease and has an incremental borrowing rate of 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.
Required:
a. Explain (and show calculations) how Kaluzniak arrived at the amound of the rental payments used in the lease agreement.
b. Prepare the entries for Kaluzniak for 2017.
c. How would Kaluzniak's accounting in part (a) change if it incurred legal fees of $700 to execute the lease documents and $500 in advertising expenses for the year in connection with the lease?
Solution :
a). Fair value of the leased asset $ 7000
Less: [tex]\text{Present value}[/tex] of unguaranteed residual $ 3778.29
value [4500 x PV(6,3%)]
Amount to be recovered through lease payment $ 3221.71
Three periodic lease payment $ 1137.05
Rental payments $ 1137.00
b). Journal entries in the books of Kaluzniak.
Date Particulars Debit($) Credit($)
2020 Jan 1 Cash account 1137
To unearned lease revenue 1137
Jan 1 Unearned lease revenue 1137
To lease revenue 1137
Dec 31 Depreciation expense 714.29
To accumulated depreciation equipment 714.29
c).
Date Particulars Debit($) Credit($)
Jan 1, 2020 Legal fee 700
To cash 700
Jan 1 Advertisement 500
To cash 500
The makers of Whirlpool washers and other electrical appliance manufacturers need to be concerned about the kind and availability of electricity in the global marketplace. If there were a compatibility problem, it would be the result of a _____________difference.
a. technological
b. cultural
c. societal
d. economic
Answer:
a. technological
Explanation:
since in the given situation it is mentioned that the manufactured are concerned with respect to the availability of the electricity in the global marketplace. Now when the compatibility problem is there so this is the technological difference as here the compatibility is to be seen whether it is fiited or not
Therefore the option a is correct
suppose ta hurricane hits alabama causing widespread damage to houses and businesses the governor of alabama places pirce cielings on all building materials to keep the prices reasonable
Answer:
Shortages of building materials and a slower recovery from the storm
Explanation:
From the question we are informed about an instance, whereby a hurricane hits Alabama, causing widespread damage to houses and businesses. The governor of Alabama places price ceilings on all building materials to keep the prices reasonable. In this case,what most likely result is Shortages of building materials and a slower recovery from the storm.
From law of demand, which expressed that provided other factors remain equal, when price of a good goes higher, then there would be less demand of that good from
people and vice versa. higher price brings lower the quantity demanded, and lower price brings higher the quantity demanded, therefore in the case, above as the price of ceilings on all building materials so that price becomes reasonable people demand more and it leads to Shortages of building materials
Best Buy Electronics sells computers and provides hardware maintenance services. On April 1st, Best Buy sold a package deal containing a computer and a one-year unlimited maintenance/repair service for the computer at a bundle price of $1,000. If sold separately, the computer costs $840 and the one-year unlimited maintenance/repair service costs $360. How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly?
a. $985.50
b. $19.50
c. $821.25
d. $1,000
Answer:
C. $725
Explanation:
Calculation to determine How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly
Total cost if sold separately = 840 + 360
Total cost if sold separately = 1200
% of Computer = 840/1200
% of Computer= 70%
% of maintenance = 360/1200
% of maintenance= 30%
Revenue to be recognized for the month for computer
Revenue = 1,000 * 70%
Revenue = $700
Revenue to be recognized for the month for maintenance service costs
Revenue = (30% * 1000)/12
Revenue = 300/12
Revenue = $25
Total amount to be recognized =$700+ $25
Total amount to be recognized =$725
Therefore How much revenue does Best Buy Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly will be $725
Swifty Corporation took a physical inventory on December 31 and determined that goods costing $215,000 were on hand. Not included in the physical count were $27,000 of goods purchased from Marigold Corp., FOB, shipping point, and $20,000 of goods sold to Concord Corporation for $34,000, FOB destination. Both the Marigold purchase and the Concord sale were in transit at year-end.
Required:
What amount should Swifty report as its December 31 inventory?
Answer:
$262,000
Explanation:
Ending inventory = Goods on Hand + Cost Goods purchased from Marigold Corp + Cost of goods sold to Marigold Corp.
Ending inventory = $215,000 + $27,000 + $20,000
Ending inventory = $262,000
So, the amount that should Swifty report as its December 31 inventory is $262,000.
Cost of Production Report: No Beginning Inventories Atlanta Paper Company produces newsprint paper through a special recycling process using scrap paper products. Production and cost data for October 2017, the first month of operations for the company's new Brunswick plant, follow: Units of product started in process during October 80,000 tons Units completed and transferred to finished goods 75,000 tons Machine hours operated 7,000 Direct materials costs incurred $ 486,000 Direct labor costs incurred $ 190,800Raw materials are added at the beginning of the process for each unit of product produced, and labor and manufacturing overhead are added evenly throughout the manufacturing process. Manufacturing overhead is applied to Work-in-Process at the rate of $24 per machine hour. Units in process at the end of the period were 65 percent converted.Prepare a cost of production report for Oregon Paper Company for October. (Round answers to the nearest whole number unless otherwise noted.)Oregon Paper CompanyCost of Production ReportFor the Month Ending October 31, 2009Summary of units in process (tons): Beginning Answer Units started Answer In process Answer Completed (Enter as a negative number.)Answer Ending Answer Equivalent units in process: Materials Conversion TotalUnits completed Answer Answer Plus equivalent units in ending inventory Answer Answer Equivalent units in process Answer Answer Total cost to be accounted for andcost per equivalent unit in process: Beginning work-in-process $Answer $Answer $AnswerCurrent costs Answer Answer AnswerTotal cost in process $Answer $Answer $AnswerEquivalent units in process
Answer:
Atlanta Paper Company
Atlanta Paper Company
Cost of Production Report
For the Month Ending October 31, 2009
a. Summary of units in process (tons):
Beginning 0
Units started 80,000
In process 80,000
Completed (75,000)
Ending 5,000
b. Equivalent units in process: Materials Conversion Total
Units completed 75,000 75,000
Plus ending inventory 5,000 3,250
Equivalent units in process 80,000 78,250
c. Total cost to be accounted for and cost per equivalent unit in process:
Materials Conversion Total
Beginning work-in-process $0 $0 $0
Current costs $486,000 $358,800 $844,800
Total cost in process $486,000 $358,800 $844,800
Equivalent units in process 80,000 78,250
Cost per equivalent unit $6.075 $4.585
d. Cost accounted for:
Materials Conversion Total
Units completed $455,625 $343,875 $799,500
Ending work in process 30,375 14,901 45,276
Total costs accounted for $486,000 $358,776 $844,776
Explanation:
a) Data and Calculations:
Units of product started in process during October 80,000 tons
Units completed and transferred to finished goods 75,000 tons
Ending work in process inventory, October ending 5,000 tons (80,000 - 75,000)
Machine hours operated 7,000
Direct materials costs incurred $486,000
Direct labor costs incurred $190,800
Manufacturing overhead cost = $168,000 (7,000 * $24)
Total conversion costs = $358,800 ($190,800 + $168,000)
Ending work in process 65% converted.
XYZ Corporation manufactures orange safety suits for road workers. The following information relates to the corporation's purchases and use of material for April: Material purchased 12,000 yards Material used in production 10,000 yards Standard material allowed for suits produced 10,800 yards The company's materials price variance for April was $3,000 Favorable. Its materials quantity variance for April was $5,000 Favorable. What does the company use as a standard price per yard of material for its safety suits
Answer:
$6.25 per yard
Explanation:
The computation of the standard price per yard of material for its safety suits is shown below:
Material quantity variance = Standard Price × (Actual quantity - Standard quantity)
-$5,000 = Standard price × (10,000 - 10,800)
Standard price = -$5,000 ÷ (-800)
= $6.25 per yard
Hence, the standard price per yard of material for its safety suits is $6.25 per yard
When an Accounts Payable department improves their information system resulting in faster payments to vendors, without the Accounts Receivable Department doing the same, leading to a cash flow crunch, what can we say happened in decision-theoretic terms
Answer: C) suboptimization
Explanation:
The Accounts Payable department's system has been optimized yet the Accounts receivable's system has not been optimized. This means that the company as a whole is suboptimized because only one department was optimized and the other was not.
It can lead to problems such as a credit crunch because the company is paying cash faster than it is receiving it. If both departments were optimized, this wouldn't be the case as the payments and receipts would tally.
Chilly Moose Fruit Producer has a total asset turnover ratio of 3.50x, net annual sales of $40 million, and operating expenses of $18 million (including depreciation and amortization). On its balance sheet and income statement, respectively, it reported total debt of $2.50 million on which it pays a 11% interest rate.
To analyze a company's financial leverage situation, you need to measure the firm's debt management ratios. Based on the preceding information, what are the values for Chilly Moose Fruit's debt management ratios?
Ratio Value
Debt ratio
Times-interest-earned ratio
The US tax structure influences a firm's willingness to finance with debt. The tax structure more debt.
Answer:
Total Assets Turnover = Sales/Total Assets
Total Assets = Sales / Total Assets Turnover
Total Assets = 40 / 3.50
Total Assets = 11.43
Debt Ratio = Debt / Total Assets
Debt Ratio = 2.50/11.43
Debt Ratio = 0.2188
Debt Ratio = 0.22
EBIT = Sales - Operating Expenses
EBIT = 40 - 18
EBIT = $22
Interest = $2.50*11%
Interest = 0.275
EBIT/Interest = $22/0.0.275
EBIT/Interest = $800
The US tax structure influences a firm's willingness to finance with debt. The tax structure encourages more debt.