Use the information for the question(s) below.
Fly by Night Aviation (FBNA) expects to have net income next year of $24 million and free cash flow of $27 million. FBNA's marginal corporate tax rate is 40%.
-FBNA's EBIT is closest to:

Question

Quizplus · Accepted Answer

A) EBIT = NI + Taxes + Interest expense
FCF = NI + Interest expense => 27 = 24 + interest expense, so interest expense = 3
(EBIT - Interest Expense)(1 - .4) = NI
(EBIT - 3)(.6) = 24
EBIT = 24 / .6 + 3 = $43

Use the Information for the Question(s) Below