Question

Tater and Pepper Corp. reported free cash flows for 2018 of $51.1 million and investment in operating capital of $34.1 million. Tater and Pepper incurred $14.8 million in depreciation expense and paid $25.3 million in taxes on EBIT in 2018. Calculate Tater and Pepper’s 2018 EBIT.

Answer 1

Answer:

 Tater and Pepper Corp

computation of EBIT

                                                                                    $million

Free cash flow                                                                  51.1

Add: Tax                                                   25.3

       Investment in operating Capital      34.1                 59.4

                                                                                         110.5

less:  Depreciation    expenses                                       14.8  

EBIT                                                                                    95.7                  

Explanation:

Answer 2

Answer:

Earnings before interest and tax is $95.7 million

Explanation:

Earnings before interest and tax  is the short form for earnings before interest and tax, which is net income of the company before considering paying  interest obligation to bondholders and taxes payable to the relevant tax authorities whether state,federal or local authorities

Earning's Before Interest and Taxes

Operating cash flow = FCF + investment in Capital expenditure

$51.1 million+$34.1million = 85.2 million

OCF= EBIT - Taxes + Depreciation

85.2 million = EBIT -25.3 million +14.8  million = ?

EBIT = 95.7 million