Question

Byron Books Inc. recently reported $13 million of net income. Its EBIT was $32.5 million, and its tax rate was 35%.What was its interest expense?

Answer 1

Answer:

$12.5 million

Explanation:

The interest expense can be determined as the EBIT subtracted by the EBT.

The EBT (earnings before taxes) are:

$EBT = \frac{Net\ income}{1-T}=\frac{13}{1-0.35}=20\ million$

Interest expense is:

$I = EBIT -EBT\\I=\ 32.5 -\ 20\\I=\ 12.5\ million$

The interest expense for Byron Books Inc. was $12,5 million.