Question

Talbot Enterprises recently reported an EBITDA of $7.5 million and net income of $1.875 million. It had $1.95 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

Answer 1

The charge for depreciation and amortization= $2425000

Step-by-step explanation:

Giving the following information we need to calculate the charge for depreciation and amortization:

EBITDA= 7500000

Net Income= 1875000

Interest= 1950000

t=0,40

We know that:

EBITDA

depreciation and amortization (-)

=EBITD

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

We have to calculate the amount of Taxes:

Tax= [Net income/(1-t)]-Net profit= (1875000/0,60)-1875000=1250000

EBIT=Net income+Tax+Interest= 1875000+1250000+1950000=5075000

D&A=EBITDA-EBIT=7500000-5075000= $2425000