Question

Free Cash Flow Catering Corp. reported free cash flows for 2008 of $8.19 million and investment in operating capital of $2.19 million. Catering listed $0.9 million in depreciation expense and $2.19 million in taxes on its 2008 income statement. What was Catering's 2008 EBIT?

Answer 1

EBIT is $11.67 million

Step-by-step explanation:

For computing the EBIT, first we have to calculate the operating cash flow which is shown below:

FCF = Operating cash flow – Investment in operating capital

$8.19 million = Operating cash flow - $2.19 million

So, the Operating cash flow = $10.38 million

Now we apply the operating cash flow which is shown below:

The operating cash flow is shown below:

= EBIT + Depreciation - Income tax expense

$10.38 million = EBIT + $0.9 million -2.19 million

$10.38 million = EBIT - $1.29 million

So, EBIT is $11.67 million