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Use the following information to answer the next question. Total Asset = $40 million Basic earning power (BEP) ratio is 20% Depreciation = $1.0 million. Times-interest-earned (TIE) Principal payments = 4 million ratio is 6.55 O $1.35 million; $0.37 million O $3.33 million; $0.83 million Lease payments = 0.6 million What is the company's EBIT? The company's interest expense? O $8.0 million; $0.62 million O $7.5 million; $0.75 million O$8.0 million; $1.22 million

Use the following information to answer the next question. Total Asset = $40 million Basic earning power (BEP) ratio is 20% Depreciation = $1.0 million. Times-interest-earned (TIE) Principal payments = 4 million ratio is 6.55 O $1.35 million; $0.37 million O $3.33 million; $0.83 million Lease payments = 0.6 million What is the company's EBIT? The company's interest expense? O $8.0 million; $0.62 million O $7.5 million; $0.75 million O$8.0 million; $1.22 million

Essentials Of Investments
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
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Use the following information to answer the next question. Total Asset = $40 million Basic earning power (BEP) ratio is 20% Times-interest-earned (TIE) Principal payments = 4 million ratio is 6.55 $1.35 million; $0.37 million What is the company's EBIT? The company's interest expense? $3.33 million; $0.83 million $8.0 million; $0.62 million Depreciation = $1.0 million. $7.5 million; $0.75 million Lease payments = 0.6 million $8.0 million; $1.22 million
Transcribed Image Text:Use the following information to answer the next question. Total Asset = $40 million Basic earning power (BEP) ratio is 20% Times-interest-earned (TIE) Principal payments = 4 million ratio is 6.55 $1.35 million; $0.37 million What is the company's EBIT? The company's interest expense? $3.33 million; $0.83 million $8.0 million; $0.62 million Depreciation = $1.0 million. $7.5 million; $0.75 million Lease payments = 0.6 million $8.0 million; $1.22 million
Expert Solution
Step 1: Formulas.

Basic earnings power = fraction numerator E B I T over denominator T o t a l space A s s e t s end fraction


Times Interest earned ratio = fraction numerator E B I T over denominator I n t e r e s t space E x p e n s e end fraction


where

EBIT means Earnings before Interest and tax.

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