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

$12.5 million

Step-by-step explanation:

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

The EBT (earnings before taxes) are:

`EBT = (Net\ income)/(1-T)=(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.