ELE eBook Problem Walk-Through Thomson Trucking has $12 billion in assets, and its tax rate is...

Question

Question

ELE eBook Problem Walk-Through Thomson Trucking has $12 billion in assets, and its tax rate is 25%. Its basic earning power (

Answer 1

Answer #1

Net Income = Total assets * Return on assets

= 12 Billion * 0.0725

= 870 Million

Earnings before taxes (EBT) = Net Income / (1 - Tax rate)

= 870 Million / (1 - 0.25)

= 1160 Million

Earnings before Interest and taxes (EBIT) = Total assets * BEP

= 12 Billion * 0.15

= 1800 Million

Times interest earned ratio = EBIT / Earnings before taxes

= 1800 / 1160

= 1.55 times

Answer 2

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