Final answer:
The calculation of the company's EBIT involves adjusting the net income figure by adding back taxes, interests, dividends, and non-cash expenses such as depreciation. However, the correct EBIT is not reflected in any of the multiple-choice options provided, suggesting there might be an error in the question or provided options.
Step-by-step explanation:
To calculate the company's earnings before interest and taxes (EBIT), we need to adjust the net income by adding back the taxes, interest, and non-cash expenses like depreciation — and then subtracting the dividends.
Start with increasing retained earnings: $540
Add paid dividends: $540 + $224 = $764
Add interest: $764 + $645 = $1409
Calculate tax provision: $1409 / (1 - 0.40) = $1409 / 0.60 = $2348.33
Add depreciation since it is a non-cash charge: $2348.33 + $764 = $3112.33
However, none of the calculated figures match the multiple choice options. It appears there may be a mistake as the calculation does not provide an answer close to any of the choices given (a- $2,189, b- $1,545, c- $1,273, d- $1,918, e- $6,660).
If we were to attempt to match our calculated EBIT to the closest available option, it would be option (d) $1,918 based on closest numerical value, though clearly this does not align correctly and therefore may indicate a possible error in the question or provided options.