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2 August, 08:16

Molteni Motors Inc. recently reported $3 million of net income. Its EBIT was $6.75 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 $3 million net income by 1 - T = 0.6 to find the pre-tax income. The difference between EBIT and taxable income must be the interest expense.) Round your answer to the nearest dollar. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.

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  1. 2 August, 10:31
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    Interest = $1750000

    Explanation:

    We know that:

    EBIT

    interest (-)

    =earnings before taxes

    tax (-)

    =Net profit

    EBIT = 6750000

    Interest=?

    t = 0,40

    Net profit = 3000000

    interest = [netprofit / (1-t) ] - EBIT

    interest = (3000000/0,60) - 6750000

    interest = 1750000

    Tax = (EBIT-interest) * 0,35 = 2000000
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