Negative EBIT - LBO Model (Interest and Taxes)?
Hi, so if I have a negative EBIT in my LBO model, how do I treat the cash paid interest expenses? Do I assume that they'll be 0 in my income statement, or show them as they are and adjust in the cash flow statement? The company can't pay. I understand that taxes go to NOLs, but what about interest....Here's an example:
Interest Exp: 20; Tax Rate: 20%
CASE A
EBIT: (100)
Interest: (20)
Earnings Before Interest: (120)
Tax: 0
Net Income: (120)
NOLs Go Up by 120
Case B:
EBIT: (100)
Interest: (0)
Earnings Before Interest: (100)
???
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