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

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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] (Points: 2)
        $40 Million
        $43 million
        $45 million
        $60 million

Answer:         $45 ...

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