i. If a company buys a factory for $100 with a useful life of ten years, using debt with a 5% interest rate, show me the changes at 40% tax rate
| +324 | UBS Tech MD hires Son (from no-name college) as an Intern | 54 | 14h |
| +89 | [Official] 2026 IB Analyst Bonus Megathread (with 2025 Consolidated Pay and Perks/Benefits) | 12 | 1d |
| +75 | Evercore Intern Seizure | 16 | 14m |
| +54 | Is DCM actually underrated ? | 20 | 11h |
| +46 | Are all Tech / TMT groups sweaty? | 33 | 6h |
| +41 | UBS Groups Ranked by Future Outlook | 20 | 5d |
| +41 | JPM M&A is Gone??? Purely Coverage Banking??? | 20 | 19h |
| +37 | Am I behind? 31 Year Old Analyst | 9 | 23h |
| +36 | Losing my personality in Banking | 5 | 1d |
| +32 | UVA McIntire vs Cornell Dyson for IB | 19 | 3d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
godamn now i gotta learn this question while considering interest rate too... fckk
I won't give you a straight up answer because that's pointless if you don't understand the accounting, but here is what you need to think about.
At purchase you're going to be adding PPE and Debt to the balance sheet, consider how this is reflected on the cash flow statement as well.
Interest on the debt and depreciation on the factory will then be expensed over each of the next ten years, pretty easy to calculate the implications of this for taxes and net income, then you need to work out how it affects cash flow from operations and the balance sheet.
You didn't say anything about when principal on the debt would be repaid but if it's assumed that that happens in year 10 then that will need to be reflected in the cash flow statement and balance sheet.
Guess it depends on annual interest payments, how the 5% compounds, etc. - but basically for year one, $10 in depreciation, $5 in interest expense (just doing a basic annual 5% on outstanding $100), which equal $15 total in expenses, meaning $15*40% = 6 bucks less in taxes. Is that the question?
Explicabo aspernatur optio asperiores. Odit aspernatur ex ut inventore autem. Inventore saepe natus ratione consequatur aspernatur. Doloribus esse reiciendis repellat consequuntur pariatur aliquid sint.
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...