Byron Books Inc. recently reported $15 million of net income. Its EBIT was $33 million, and...

Byron Books Inc. recently reported $15 million of net income. Its EBIT was $33 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $15 million of net income by (1 - T) = 0.6 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.] Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary. Do not round intermediate calculations.

Solutions

Expert Solution

Given: Net Income = 15,000,000, EBIT = 33,000,000, tax rate = 40% = 0.4.

To Find: Interest Expense

Solution:

Income Statement:

Sales

Cost of goods sold

Gross Profit

EBITDA

Depreciation

EBIT = 33,000,000

Interest = 8,000,000

PBT

Taxes (40%)

Net Income = 15,000,000

Interest Expense = EBIT - Taxable Income

Taxable Income = Net Income / (1- tax rate) = 15,000,000 / (1 - 0.4) = 25,000,000

Interest Enpense = 33,000,000 - 25,000,000 = 8,000,000

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Byron Books Inc. recently reported $18 million of net income. Its EBIT was $28.6 million, and...

Byron Books Inc. recently reported $18 million of net income. Its EBIT was $28.6 million, and its tax rate was 25%. What was its interest expense? (Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $18 million of net income by (1 - T) = 0.75 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.) Write...

Byron Books Inc. recently reported $6 million of net income. Its EBIT was $8.2 million, and...

Byron Books Inc. recently reported $6 million of net income. Its EBIT was $8.2 million, and its tax rate was 25%. What was its interest expense? (Hint: Write out the headings for an income statement, and then fill in the known values. Then divide $6 million of net income by (1 - T) = 0.75 to find the pretax income. The difference between EBIT and taxable income must be interest expense. Use this same procedure to complete similar problems.) Write...

Ferrell Inc. recently reported net income of $6 million. It has250,000 shares of common stock,...

Ferrell Inc. recently reported net income of $6 million. It has 250,000 shares of common stock, which currently trades at $49 a share. Ferrell continues to expand and anticipates that 1 year from now, its net income will be $9.3 million. Over the next year, it also anticipates issuing an additional 25,000 shares of stock so that 1 year from now it will have 275,000 shares of common stock. Assuming Ferrell's price/earnings ratio remains at its current level, what will...

Ramakrishnan, Inc. reported 2018 net income of $15 million and depreciation of $3,500,000. The top part...

Ramakrishnan, Inc. reported 2018 net income of $15 million and depreciation of $3,500,000. The top part of Ramakrishnan, Inc.’s 2018 and 2017 balance sheets is listed below (in millions of dollars). 2018 2017 2018 2017 Current assets: Current liabilities: Cash and marketable securities $ 20 $ 27 Accrued wages and taxes $ 45 $ 36 Accounts receivable 95 93 Accounts payable 73 65 Inventory 175 146 Notes payable 65 60 Total $ 290 $ 266 Total $ 183 $ 161...

Cullumber Corporation recently reported an EBITDA of $30.70 million and net income of $9.7 million. The...

Cullumber Corporation recently reported an EBITDA of $30.70 million and net income of $9.7 million. The company had $6.8 million in interest expense, and it's average corporate tax rate was 35 percent. What was its depreciation and amortization expense? (Round answer to 2 decimal places and enter your answer in dollars, e.g. 9,700,000.25)

Patterson Brothers recently reported an EBITDA of $14.5 million and net income of $4.35 million. It...

Patterson Brothers recently reported an EBITDA of $14.5 million and net income of $4.35 million. It had $1.5 million of interest expense, and its corporate tax rate was 25%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest dollar, if necessary.

Patterson Brothers recently reported an EBITDA of $5.5 million and net income of $0.825 million. It...

Patterson Brothers recently reported an EBITDA of $5.5 million and net income of $0.825 million. It had $1.5 million of interest expense, and its corporate tax rate was 25%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest dollar, if necessary. $

Cox Corporation recently reported an EBITDA of $61 million and $10 million of net income.

Cox Corporation recently reported an EBITDA of $61 million and $10 million of net income. The company has $15 million interest expense and the corporate tax rate is 40.0% percent. What was the company's depreciation and amortization expense? (Answers are in $ millions.)$56.00$46.00$51.00$36.00$29.33

Patterson Brothers recently reported an EBITDA of $19.5 million and net income of $3.9 million. It...

Patterson Brothers recently reported an EBITDA of $19.5 million and net income of $3.9 million. It had $1.5 million of interest expense, and its corporate tax rate was 25%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round intermediate calculations. Round your answer to the nearest dollar, if necessary.

Nicholas Health Systems recently reported an EBITDA of $25.0 million and net income of $15.8 million....

Nicholas Health Systems recently reported an EBITDA of $25.0 million and net income of $15.8 million. It had $2.0 million of interest expense, and its federal tax rate was 21% (ignore any possible state corporate taxes). What was its charge for depreciation and amortization?

Subjects