Answer:
Depreciation & amortization = $1 million
Explanation:
The EBITDA is the earning of the company before interest, tax and depreciation and amortization deduction.
To calculate the Net Income from EBITDA, we subtract the charges for depreciation, amortization, interest and taxes.
Thus, net income is,
Net income = EBITDA - Depreciation & amortization - Interest - Tax
The tax is deducted from EBT which is earnings before tax. It is calculated by deducting the depreciation & amortization and interest from EBITDA. Thus, after deducting tax from EBT, we get net income. We can say that if tax is 40% it means that tax is 40% of EBT and net income is the remaining 60% of EBT.
Thus, if 60% of EBT is 1.5 million, then total EBT is,
EBT = 1.5 / 0.6 = $2.5 million
So, tax is = 2.5 * 0.4 = $1 million
Plugging in the values available in the net income formula,
1.5 = 5.5 - Depreciation & amortization - 2 - 1
1.5 + Depreciation & amortization = 5.5 - 3
Depreciation & amortization = 2.5 - 1.5
Depreciation & amortization = $1 million
