Question

Tater and Pepper Corp. reported free cash flows for 2018 of $39.1 million and investment in operating capital of $22.1 million. Tater and Pepper incurred $13.6 million in depreciation expense and paid $28.9 million in taxes on EBIT in 2018

Calculate Tater and Pepper's 2018 EBIT. (Enter your answer in millions of dollars rounded to 1 decimal place.)
EBIT $765,000,000 0,000, million

Answer 1

EBIT $76.5m

Step-by-step explanation:

Calculation of Tater and Pepper's 2018 EBIT

Calculation of 2018 Tater and Pepper’s free cash flow :

Free Cash Flow= Operating cash flow – Investment in operating capital

$39.1m= OCF– $22.1m

Therefore the operating cash flow will be:

$39.1m + $22.1m

= $61.2m

Calculation of Tater and Pepper’s operating cash flow:

Using this formula

Operating Cash Flow= EBIT(1 – Tax rate) + Depreciation = EBIT – Taxes on EBIT + Depreciation

Let plug in the formula

$61.2m = EBIT – $28.9m + $13.6m

Therefore the EBIT will be :

$61.2m + $28.9m – $13.6m

= $76.5m