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 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.

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Expert Solution

Net income	EBIT - Interest - Taxes
Earnings before taxes	Net income/(1-Tax rate)
Earnings before taxes	18000000/(1-0.25)
Earnings before taxes	18000000/0.75
Earnings before taxes	$24,000,000

Interest expense	Earnings before taxes - EBIT
Interest expense	24000000-18000000
Interest expense	$6,000,000

Thus, interest expense is $6,000,000

jeff jeffy answered 2 years ago

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