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Smashed Pumpkins Company paid $232 in dividends and $652 in interest over the past year. The company increased retained earnings by $546 and had accounts payable of $738. Sales for the year were $16,685 and depreciation was $768. The tax rate was 40 percent. What was the company's EBIT?

Respuesta :

gauravsingh23VT

$1948 is the  company's EBIT. Based on the information given in the question, the company's EBIT would be calculated.

Explanation:

Earnings After Tax will be:

= Retained Earnings + Dividends

= $232+ $546

= $778

Earnings Before Tax will be:

= EAT / (1 - tax rate)

= $778  / (1 - 40%)

= $778 / (1 - 0.40)

=$778 /0.60

=$1296.66

EBIT would then be calculated as:

= EBIT + Interest

= $1296.66+ $652

=$1948

Thus, it is $1948

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