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The signal company has operating income of $600,000. The company's depreciation expense is $100,000 and it...

The signal company has operating income of $600,000. The company's depreciation expense is $100,000 and it has a 40% tax rate. If the company has $50,000 in annual interest expense, calculate the net income and cash flow.

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Answer #1

Income statement

Operating income

600000

- Depreciation Exp

100000

EBIT

500000

-Interest Exp

50000

PBT

450000

-Tax Exp

180000

Net income

270000

Cash flow = EBIT - Tax exp + depreciation Exp

                    = 500000 – 180000 + 100000

                    = 420000

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