Problem 32 Income Statement Little Books Inc recently report

Problem 3-2 Income Statement Little 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 wn values. Then divide $15 million net income by (1-T) = 0.6 to find the pretax income. The difference between EBIT and taxable income must be the interest expense. Use this same procedure to complete sim 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

Solution

Pretax Income = Net Income / (1-Tax rate) = $15,000,000 / (1-0.40) = $25,000,000 Interest Expense = EBIT - Pretax Income = $31,500,000 - $25,000,000 = $65,00,000