Why we only add 30 back to EBIT? It says interest capitalized in 2012 is 47.5. Why don’t we use 47.5 instead of use “interest capitalized in COGS of 30?”
Because the interest is amortized as the good are sold.
capitalized = goes to balance sheet, why do u wanna add it to ebit ? 30 has been substracted to get to Ebit so u have to add it back!
Ok , makes sense, thanks
I added both 77.5 (30 + 47.5) to EBIT and and only 47.5 to Int Exp. Got close to the same answer as the correct answer, so circled it.
But this is exactly the kind of curveball there will be in almost every question on the exam. This vignette i got 5 wrong out of 6. 