Trevi Corporation recently reported an EBITDA of $31,200 and $9,700 of net income. The company has...

Trevi Corporation recently reported an EBITDA of $31,200 and $9,700 of net income. The company has $6,700 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense?

Expert Solution

Solution:
	The company’s depreciation and amortization expense = $9576.92

Working Notes:

	Net Income (EAT)	9,700	given
Add:	Taxes @ 35%	5,223.0769
	[9,700/(1-tax rate)] x 35%
	[9,700/(1-.35)] x 35%

	EBT Earnings before taxes	14,923.0769
Add:	Interest Expense	$6,700
	EBIT (Earnings before interest & taxes)	$21,623.08


Now
	EBITDA	$31,200
Less:	EBIT	$21,623.08
	DA[Depreciation & Amortization exp.]	$9,576.92

Recheck

	EBITDA	$31,200
Less:	DA[Depreciation & Amortization exp.]	9576.92
	EBIT	21623.08
Less:	Interest Exp.	6,700
	EBT	14,923.08
Less:	Taxes @ 35%	5223.08
	Net Income (EAT)	9700.00


Hence,
	DA[Depreciation & Amortization exp.]	$9,576.92

Please feel free to ask if anything about above solution in comment section of the question.

jeff jeffy answered 1 year ago

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