Task: Fundamentals of Financial Management
Problem 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.]
Problem 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?
Problem 3: 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?