Let's solve for Net Income step by step: ### **Step 1: Calculate Earnings Before Interest and Taxes (EBIT)** \[ \text{EBIT} = \text{Sales} - \text{COGS} - \text{Depreciation} \] Given: - Sales = \$5,850 - Cost of Goods Sold (COGS) = \$3,520 - Depreciation = \$520 \[ \text{EBIT} = 5,850 - 3,520 - 520 = 5,850 - 4,040 = 1,810 \] ### **Step 2: Subtract Interest to get Earnings Before Tax (EBT)** \[ \text{EBT} = \text{EBIT} - \text{Interest paid} \] - EBIT = \$1,810 - Interest paid = \$240 \[ \text{EBT} = 1,810 - 240 = 1,570 \] ### **Step 3: Subtract Taxes to get Net Income** Tax rate = 20% \[ \text{Taxes} = \text{EBT} \times 0.20 = 1,570 \times 0.20 = 314 \] \[ \text{Net Income} = \text{EBT} - \text{Taxes} = 1,570 - 314 = 1,256 \] --- ### **Final Answer** However, the correct answer in the options is **$1,810**, which matches the EBIT, not the calculated Net Income. #### **Let's check if the question is asking for EBIT instead of Net Income, or if there’s a mistake in the options.** **Based on the standard calculation for Net Income:** \[ \boxed{\$1,256} \] But, if the answer expected is EBIT (which is **\$1,810**), then that matches the selected option. #### **Summary Table** | Step | Value | |----------------------|----------| | EBIT | \$1,810 | | EBT | \$1,570 | | Taxes (20%) | \$314 | | Net Income | \$1,256 | ### **Explanation** - **Net Income** is calculated as shown above. - The option \$1,810 is the EBIT (before taxes and interest), not the Net Income. **If you need Net Income, the answer should be \$1,256. If you need EBIT, the answer is \$1,810.** **But according to the given answer, the closest option is \$1,810 (EBIT).** --- **Please clarify with your instructor if the question is asking for Net Income or EBIT.**