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You are given the following information for Merrimack, Inc. Sales 240,000 Debt 60,000 Dividends. 5,000 Equity 30,000 Interest rate. 7% Net income 16,000 Tax rate
You are given the following information for Merrimack, Inc.
Sales 240,000
Debt 60,000
Dividends. 5,000
Equity 30,000
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. (Hint: First prepare income statement working backwards from the bottom to find EBIT.)
What is the company's basic earning power (BEP)?
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