Question

Rao Construction recently reported $20.50 million of sales, $12.60 million of operating costs other than depreciation, and $3.00 million of depreciation. It had $8.50 million of bonds outstanding that carry a 7.0% interest rate, and its federal-plus-state income tax rate was 40%. What was Rao's operating income, or EBIT, in millions? a) $3.21 b) $3.57 c) $3.97 d) $4.41 e) $4.90

Answer 1

Answer:

The correct option is e) $4.90

Step-by-step explanation:

Consider the provided information.

It is given that the Sales is $20.50  million

Operating costs excluding depreciation $12.60 million

Depreciation $3.00  million

Operating income (EBIT) = Net Earnings - Operating costs - Depreciation

Operating income (EBIT) = $20.50 - $12.60- $3.00

Operating income (EBIT) = $ 4.90

Hence, the correct option is e) $4.90