hassan

you are losing the entire point.

Year 1 was 2007 in the sample exam when Cap Interest was the 64 Mill.
Year 1: X amount of Sales - COGS
Year 1: High amount of Capitalized Interest Asset So High depreciation.
Year 1: EBIT is lower.

Between Year 1 and Year 2: a large amount of the capitalized Interest asset got paid off. Year 2: 2008 when capitalized Interest account balance was the 30 Mill or there abouts.
So Year 2: Depreciation expense is lower.
So Year 2: EBIT is higher WHEN COMPARED TO THE EBIT that would have been if the Capitalized Interest Balance sheet account HAD BEEN THE SAME AS IN 2007.

Does that distinction make sense?

CP