Tater and Pepper Corp. reported free cash flows for 2018 of $20 million and investment in operating capital of $15 million. Tater and Pepper listed $8 million in depreciation expense and $12 million in taxes on its 2018 income statement. Calculate Tater and Pepper's 2018 EBIT.
A) $49,000,000
B) $42,000,000
C) $39,000,000
D) $47,000,000

Question

Quizplus · Accepted Answer

Free cash flow = EBIT - Taxes + Depreciation - Investment in operating capital. Rearranging gives EBIT = Free cash flow + Taxes - Depreciation + Investment in operating capital = $20M + $12M - $8M + $15M = $39M.