LBO test with negative earnings
I have a couple questions for when you're constructing an LBO for a business with negative earnings:
- For tax, can you just multiply the tax rate with the pre-tax income and add it as a tax benefit rather than expense? I saw it being done like this in sample models online.
- If you have negative cash-flow and / or have mandatory amortization, would you be using a revolver to cover the gap?
- Are there an other nuances to consider when dealing with these sorts of scenarios in a model test?
Thank you!
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