Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![**Question 28**
Use the following information for Lowell, Inc. for this and the next seven questions:
- Sales: $200,000
- Debt: $95,000
- Dividends: $5,000
- Equity: $40,000
- Interest rate: 7%
- Net income: $16,000
- Tax rate: 30%
Assume the company has no short-term debt. Also assume that all asset turnover, profit margin, and dividend payout ratios remain constant.
**Question:** What are the company’s earnings before interest and taxes (EBIT)?
**Options:**
- A. 16,000
- B. 22,587
- C. 29,507
- D. 6,650
- E. 25,432
- F. 18,594
The answer selected is option A: 16,000.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe23436e2-3710-4584-9afd-a6782603d0bb%2F64f7502d-015a-4689-a36a-bb47fbe8e948%2Fk9jn5kq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Question 28**
Use the following information for Lowell, Inc. for this and the next seven questions:
- Sales: $200,000
- Debt: $95,000
- Dividends: $5,000
- Equity: $40,000
- Interest rate: 7%
- Net income: $16,000
- Tax rate: 30%
Assume the company has no short-term debt. Also assume that all asset turnover, profit margin, and dividend payout ratios remain constant.
**Question:** What are the company’s earnings before interest and taxes (EBIT)?
**Options:**
- A. 16,000
- B. 22,587
- C. 29,507
- D. 6,650
- E. 25,432
- F. 18,594
The answer selected is option A: 16,000.
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