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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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