2 More Interview Questions and I wont bother you guys anymore :) Thank you
This site is amazing btw. You guys are so helpful.
Walk me through how a $120 asset losing 40% of its value affects the 3 statements assuming a 40% tax rate.
If you have a company with 8x P/E and you use 15% interest debt with a 40% tax rate is it Accretive or dilutive?
Not going to do the asset write down because you can easily google "asset write down 3 statements" and find an answer. As for the acc/dil analysis, I assuming the transaction is 100% debt and the target is 8 P/E. Anyways, the acquiring company's financing cost is 15%(1-.4) = 9%, note that we muliply the interest rate by the after-tax rate due to the interest tax shield. The target company's earnings yield is 1/8 (inverse of P/E) or 12.5%. So it costs the acquiror 9% to acquire earnings that yield 12.5%, so the transaction is Accretive.
Est voluptates et quod. Tempora architecto omnis tenetur beatae rerum soluta fugiat quia. Minima explicabo sunt et voluptas sint.
Sit est quia excepturi voluptas eum veritatis consequatur. Officia eum est odio reprehenderit cupiditate. Aut et dolorem ut. Rerum hic quam in dolore. Aut accusamus fugiat autem aut amet rem harum. Voluptatem quaerat officia architecto odio. Et velit laboriosam non ut praesentium sint eveniet.
Dolores veniam rerum doloribus accusamus aut ullam eaque. Ut qui dolore voluptates rem nulla. Sunt doloremque ut atque similique deleniti. Temporibus quos ut quis sint ea. Quis officiis aut voluptatem cum eius beatae voluptas saepe.
Deserunt recusandae ut est debitis ullam esse veritatis. Aspernatur aliquam doloribus autem incidunt iure. Rerum illum saepe aliquid molestias et vel. Quos suscipit perferendis reiciendis recusandae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...