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    EBIT and Net Income

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    1) Dominion expects to have net income next year of $24 million and Free Cash Flow of $27 million. Dominion's marginal corporate tax rate is 40%. Dominion's EBIT is closest to:
    [Hint: EBIT = NI + Taxes + Interest expense]
    $40 Million
    $43 million
    $45 million
    $60 million

    2) Dominion expects to have net income next year of $24 million and Free Cash Flow of $27 million. Dominion's marginal corporate tax rate is 40%. If Dominion increases leverage so that its interest expense rises by $1 million, then the amount its net income will change is closest to:
    [Hint: (EBIT - Interest Expense - chg IE) x (After-tax cash flow) = NI + chg NI]
    -$400,000
    -$600,000
    $400,000
    $600,000

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    https://brainmass.com/business/accounting/ebit-and-net-income-252283

    Solution Preview

    1) Dominion expects to have net income next year of $24 million and Free Cash Flow of $27 million. Dominion's marginal corporate tax rate is 40%.  Dominion's EBIT is closest to:
    [Hint:  EBIT = NI + Taxes + Interest expense] (Points: 2)
            $40 Million
            $43 million
            $45 million
            $60 million

    Answer:         $45 ...

    Solution Summary

    Answers and explanations to 2 multiple choice questions on EBIT and Net Income have been provided.

    $2.19

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