Calculate EBIT given the following information: Cash ﬂow from assets = $24,500; operating cash ﬂow = $8,500; depreciation = $1,000; taxes = $2,500; capital spending = ($14,000); change in net
Working capital = ($2,000).

Question

Quizplus · Accepted Answer

EBIT is calculated as Operating Cash Flow + Depreciation - Taxes. Thus, EBIT = $8,500 + $1,000 - $2,500 = $7,000. However, the correct calculation should consider the cash flow from assets, which is $24,500. The capital spending and change in net working capital are already included in the cash flow from assets, so we adjust for these to find the correct EBIT. The correct EBIT is $10,000.

Calculate EBIT Given the Following Information: Cash ﬂOw from Assets