Two firms have the same earnings before interest and taxes of $400,000 and both have a tax rate of 40%. Firm A has $10,000 interest expense whereas firm B has no interest expense. The two firms' earnings after tax net income is:

Firm A has higher net income

Firm B has lower tax expense

The difference in net income is smaller than that of interest expense due to the tax reduction on interest expense

The same

Answer rating: 100% (QA)

The correct answer is The same The earnings before interest and taxes EBIT for bot... View the full answer