Tater and Pepper Corp. reported free cash flows for 2012 of $43.1 million and investment in operating capital of $26.1 million. Tater and Pepper incurred $14.0 million in depreciation expense and paid $29.7 million in taxes on EBIT in 2012.
Calculate Tater and Pepper’s 2012 EBIT. (Enter your answer in millions of dollars rounded to 1 decimal place.)
i got 25.5
To calculate Tater and Pepper's 2012 EBIT (Earnings Before Interest and Taxes), we can use the formula:
EBIT = Operating Income + Interest Expense
However, in this case, we are not given the interest expense. Instead, we are given information about depreciation expense and taxes on EBIT. So, we can calculate EBIT as follows:
EBIT = Net Income + Taxes + Interest Expense
We are given that Tater and Pepper's free cash flows for 2012 are $43.1 million, and the investment in operating capital is $26.1 million. Free cash flows are calculated as:
Free Cash Flows = EBIT - Taxes + Depreciation - Increase in Operating Capital
We can rearrange the formula to solve for EBIT:
EBIT = Free Cash Flows + Taxes - Depreciation + Increase in Operating Capital
Since we have all the necessary information, we can substitute the values:
EBIT = $43.1 million + $29.7 million - $14.0 million + $26.1 million
Calculating the above expression:
EBIT = $84.9 million
Therefore, Tater and Pepper's 2012 EBIT is $84.9 million.