Question

Catering Corp. reported free cash flows for 2008 of $8.14 million and investment in operating capital of $2.14 million. Catering listed $0.95 million in depreciation expense and $2.14 million in taxes on its 2008 income statement. What was Catering's 2008 EBIT

Answer 1

Answer:

Catering's 2008 EBIT is $11.47 million

Explanation:

Operating cash flow = EBIT + Depreciation – Taxes

Also the same as EBIT = Operating cash flow - Depreciation + Taxes

When Operating cash flow = Free cash flows + Investment in operating capital

OCF = $8.14 million + $2.14 m illion

Operating cash flow = 10.28 million

EBIT = Operating cash flow - Depreciation + Taxes  

EBIT = 10.28 million - 0.95 million + 2.1 4 million

EBIT = $11.47 million

Catering's 2008 EBIT is $11.47 million