Explore BrainMass

Interest Expense, Depeciation Expense and Dividends

Please help me with the following 3 problems.

Fundamentals of Financial Management

3-1 Income Statement little Books Inc. recently reported $3 million of net income. Its EBIT was $6 million, and its tax rate was 40 percent. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $3 million of net income by (1-T) =0.6 to find the pre-tax income. The difference between EBIT and taxable income must be the interest expense. Use the same procedure to work some of the other problems.]

3-2. Income Statement Pearson Brothers recently reported an EBITDA of $7.5 million and net income of $1.8 million. It had $2.0 million of interest expense, and its corporate tax rate was 40 percent. What was its charge for depreciation and amortization?

3-4 Statement of retained earnings In its most recent financial statements. Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 Million. How much dividends were paid to shareholders during the year?

Solution Preview

The income statement from EBITDA looks like
Less Depreciation and Amortization
Less Interest
Less Tax
= Net Income

3-1 Net Income = 3,000,000
Net Income = Earnings Before Tax (EBT) X (1-tax ...

Solution Summary

The solution explains three questions relating to determining the amount of interest expense, depreciation and amortization expense and dividends.