Question

Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?

Answer 1

2,000,000

Step-by-step explanation:

Earnings Before Tax:

= Net Income ÷ (1 - Tax Rate)

= 2,400,000 ÷ (1 - 40%)

= 4,000,000

Tax:

= Earnings Before Tax × Tax Rate

= 4,000,000 × 40%

= 1,600,000

Depreciation and Amortization:

= Earnings after Interest but Before Depreciation - Earnings Before Tax

= 6,000,000 - 4,000,000

= 2,000,000