dividend payout ratios remain constant. What are the company's earnings before interest and taxes (EBIT)? OA. 16,000

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
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**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.
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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