Question

Income Statement Talbot Enterprises recently reported an EBITDA of $7.5 million and net income of $1.875 million. It had $1.95 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

Answer 1

Answer:

D&A=  2425000

Explanation:

Giving the following information, we need to find the charge for depreciation and amortization:

EBITDA= 7500000

Interest=1950000

Net income= 1875000

t=0,40

We know that:

EBITDA

Depreciation & Amortization Expense (-)

=Operating Income or EBIT

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

First, we need to calculate the amount of tax:

Tax= [net income/(1-t)]- net income= 1250000

EBIT= Net profit + Tax + Interest= 1875000 + 1250000+ 1950000= 5075000

Now we can calculate the amount of depreciation and amortization:

D&A= EBITDA- EBIT= 7500000 - 5075000= 2425000