Question

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A company paid $150 in dividends and $500 in interest over the past year. The company...

A company paid $150 in dividends and $500 in interest over the past year. The company increased retained earnings by $400 and had accounts payable of $690. Sales for the year were $16,000 and the tax rate was 30 percent. What was the company's EBIT?

Group of answer choices

$1,050

$1,286

$4,800

$3,750

$1,740

Expert Solution

Dividend paid = $150

Addition to Retained Earnings = $400

Net Income = Dividend paid + Addition to Retained Earnings

Net Income = $150 + $400

Net Income = $550

Income before tax = Net Income/(1-Tax rate)

= $550/(1-0.30)

Income before tax = $786

EBIT = Income before tax + Interest expenses

EBIT = $786 + $500

EBIT = $1286

Option 2

jeff jeffy answered 2 years ago

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