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New Mexico Lumber recently reported that its earnings per share were $ 5 .00. The company...

New Mexico Lumber recently reported that its earnings per share were $ 5 .00. The company has 4 00,000 shares of stock outstanding. The company's interest expense was $ 5 00,000. The corporate tax rate is 40 percent. What was the company's operating income (EBIT)? Round it to a whole dollar, and do not include the dollar sign.

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Answer #1
EBIT(balance)(3,333,333.33+500,000) 3,833,333(Approx).
Less:interest 500,000
EBT(100%)(2,000,000/0.6) 3,333,333.33
Less:tax@40%(3,333,333.33*0.4) 1,333,333.33
Net income(60%) 2,000,000

EPS=Net income/Common stock outstanding

Net income=(5*400,000)=$2,000,000

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