Question

INCOME STATEMENT

Byron Books Inc. recently reported $15 million of net income. Its EBIT was $31.5 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.

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Answer 1

Net income= (EBIT-interest) x ( 1-tax rate)

$15 m= (31.5-Interest) x (1-0.40)

$15 m= (31.5-interest) x (0.60)

$15/0.60 =31.5 – interest

$25 =31.5 - interest

Interest= 31.5-25

Interest=$6.50 millions (or) $6,500,000

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