Page 124 - Bankruptcy and Reorganization Services
P. 124
Scenario B — Projections Including Interest Expense and Excluding NOLs
Year
1 2 3 4 5
Earnings Before Interest & Taxes $200 $250 $300 $350 $400
Interest Expense $100 $100 $100 $100 $100
Earnings Before Taxes $100 $150 $200 $250 $300
Tax Rate 40% 40% 40% 40% 40%
Beginning NOL $ — $ — $ — $ — $ —
NOL Used $ — $ — $ — $ — $ —
Taxes With NOL Utilization $40 $60 $80 $100 $120
Cumulative Taxes $40 $100 $180 $280 $400
Tax Benefit of Interest $40 $40 $40 $40 $40
Cumulative Tax Benefit of Interest $40 $80 $120 $160 $200
Tax Benefit of NOL $ — $ — $ — $ — $ —
Cumulative Tax Benefit of NOL $ — $ — $ — $ — $ —
Note that the cumulative tax benefit of interest expense is $200 in Scenario B.
Scenario C — Projections Including Interest Expense and NOLs
Year
1 2 3 4 5
Earnings Before Interest & Taxes $200 $250 $300 $350 $400
Interest Expense $100 $100 $100 $100 $100
Earnings Before Taxes $100 $150 $200 $250 $300
Tax Rate 40% 40% 40% 40% 40%
Beginning NOL $500 $400 $250 $50 $ —
NOL Used $100 $150 $200 $50 $ —
Taxes With NOL Utilization $ — $ — $ — $80 $120
Cumulative Taxes $ — $ — $ — $80 $200
Tax Benefit of Interest $40 $40 $40 $40 $40
122 © 2020 Association of International Certified Professional Accountants