Patterson Brothers recently reported an EBITDA of $10.5 million and net income o
ID: 2620270 • Letter: P
Question
Patterson Brothers recently reported an EBITDA of $10.5 million and net income of $2.7 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest dollar, if necessary. Do not round intermediate calculations.
Explanation / Answer
net income (after tax 40%, given) $2,700,000 income before tax (net income / (1- tax rate) => $2,700,000 / (1-0.40) $4,500,000 add: interest expense $2,000,000 EBIT (income before tax + interest expense) $6,500,000 depreciation and amortisation (EIBTDA - EBIT) ($10,500,000 - 6,500,000) $4,000,000