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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?

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Answer:

$12.5 million

Explanation:

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

The EBT (earnings before taxes) are:

[tex]EBT = \frac{Net\ income}{1-T}=\frac{13}{1-0.35}=20\ million[/tex]

Interest expense is:

[tex]I = EBIT -EBT\\I=\$32.5 -\$20\\I=\$12.5\ million[/tex]

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

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