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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

#### 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%.Â Â Dominion's EBIT is closest to:
[Hint:Â Â EBIT = NI + Taxes + Interest expense] (Points: 2)
Â Â Â Â Â Â Â Â \$40 Million
Â Â Â Â Â Â Â Â \$43 million
Â Â Â Â Â Â Â Â \$45 million
Â Â Â Â Â Â Â Â \$60 million

Answer: Â Â Â Â Â Â Â Â \$45 ...

#### Solution Summary

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

\$2.49