PP&E Purchase 3 Statement Question
Company buys $200 PP&E 50% cash/50% debt with x interest (lets say 10%) and y principal repayment lets say ($10)
Thanks!
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Balance sheet: PPE goes up $200, cash down $120 (100 paid for PPE, 10 for interest, 10 to repay loan), liability for the note payable up $90 (100-10 repaid)
Income Statement: SGA goes up by your interest expense ($10), lowers income before taxes by 10 which lowers taxes by 10*tax rate. Assume 40% tax rate so taxes are lowered by $4 so net income goes down $6.
Cash Flows CFO: Down by interest payment ($10), up by tax savings ($4), so net down $6 CFI: Goes down $100 (cash paid for equipment) CFF: Goes down by principal repayment ($10)
Pretty sure this is right
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