Question
In this formula Levered Unlevered Revenue $100 $100 Operating costs 50 50 Net operating income 50 50 Interest expense 10 0 Earnings before taxes 40
In this formula
Levered Unlevered
Revenue $100 $100
Operating costs 50 50
Net operating income 50 50
Interest expense 10 0
Earnings before taxes 40 50
Taxes @.40 16 20
Net income 24 30
Cash flow available to investors of levered company is 34, and for unlevered company is 30.
Why calculating investors' cash flow of levered company needs to add back 10?
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Personal Financial Planning
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
14th edition
978-1305887725, 1305887727, 1305636619, 978-1305636613
