Question

Tater and Pepper Corp. reported free cash flows for 2018 of $39.1 million and investment in operating capital of $22.1 million. Tater and Pepper incurred $13.6 million in depreciation expense and paid $28.9 million in taxes on EBIT in 2018. Calculate Tater and Pepper’s 2018 EBIT.

Answer 1

Answer:

$76.5 million

Explanation:

OCF = Operating cash flow

FCF = Free cash flow

EBIT = Earning before interest and taxes

FCF = Operating cash flow – Investment in operating capital

39.1 million = OCF - 22.1 million

OCF = 61.2 million

OCF = EBIT – Taxes on EBIT + Depreciation

61.2 million = EBIT - 28.9 million + 13.6 million

EBIT = $76.5 million

Therefore, Tater and Pepper’s 2018 EBIT is $76.5 million.