JPM Investment Banking Interview Question
"How does a financing fee of $10M amortized over 5 years affect the three financial statements?" I understand everything but the debt portion. Besides being used to balance the Balance Sheet, why is debt going down by 8 in year 1 and consistently increasing by 2 for the remaining four?
Interest: Year 1: ($2m) Year 2: ($2m) Year 3: ($2m) Year 4: ($2m) Year 5: ($2m)
Net Income: Year 1: ($2m) Year 2: ($2m) Year 3: ($2m) Year 4: ($2m) Year 5: ($2m)
Year 1:
($10m) financing fee paid to banks
Year 1: $2m Year 2: $2m Year 3: $2m Year 4: $2m Year 5: $2m
Cash:
Year 1: ($10m) Year 2: Year 3: Year 4: Year 5:
Debt:
Year 1: ($8m) Year 2: $2m Year 3: $2m Year 4: $2m Year 5: $2m
Year 1: ($2m) Year 2: ($2m) Year 3: ($2m) Year 4: ($2m) Year 5: ($2m)
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