At the start of the year you buy $150 of inventory using 100% debt. During the year you sell it for $350. The debt carries 10% interest paid half in cash and half in PIK, and amortizes 20% per year. Tax rate 20%. Walk through the three statements.

Question

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5
Both sides balance.

At the start of the year you buy $150 of inventory using 100% debt. During the year you sell it for $350. The debt carries 10% interest paid half in cash and half in PIK, and amortizes 20% per year. Tax rate 20%. Walk through the three statements.

Answer

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