Question

Catering Corp. reported free cash flows for 2008 of $8.17 million and investment in operating capital of $2.17 million. Catering listed $0.92 million in depreciation expense and $2.17 million in taxes on its 2008 income statement.
What was Catering's 2008 EBIT?

Answer 1

Answer:

$11.59 million

Explanation:

The computation of earning before interest and tax is shown below:-

Free cash flow = Operating cash flow - Investment in operating cash flow

$8.17 million = Operating cash flow - $2.17 million

Operating cash flow = $10.34 million

For calculating the earning before interest

Operating cash flow = Earning before interest - Taxes + Depreciation

$10.34 million = Earning before interest - $2.17 million + $0.92 million

= $10.34 million = Earning before interest - $1.25 million

Earning before interest = $11.59 million