Next, let's work on interest expense. So for each of the debt tranches below, we're gonna calculate the interest expense based on the given interest rate for the senior debt. We're gonna take the interest rate provided at 6.3% in row 36. I'm gonna lock that in and I'm gonna multiply that times the average of the balances for this year and the prior year, and that gives us an interest expense on senior debt of 1 0 8. Now let's do the same thing for the interest expense on the junior debt. We first take the cost of debt of the junior debt, which is 8.3%.
We lock that in and we multiply times the average of this year's balance and last year's balance, and that would give us 66.9. Now that we have the interest expense, the last step here is to bring that expense into our calculation of net income and therefore our calculation of cash flows. So we have to go back up in the model up to row 74 where we have interest expense and we need to bring those calculations up. Now before we simply link the interest expense on senior and junior debt up to row 74, we have to make sure that we incorporate a circular breaker into our formula. So let's start with an if statement, and we say if we already have a built-in circular breaker in this model, which is called C switch. So we'll say if C switch equals one, then we actually want to pull the interest expense data from below. So I'm gonna take the 1 0 8 from the senior debt, and I'm gonna add to that the 66.9 from the junior debt. However, if the switch is off or zero, we want our interest to be equal to zero. Let's close that. Press enter. And as you can see, our interest expense right now is zero because the switch is right now equal to zero. Now before we look at the switch, and before we turn it on, let's go ahead and copy all of our calculations in this section starting from the top, which is revenue, all the way to our debt repaid metric, and we're gonna copy that to the right across all five years.
So at this point, we have completed all of our forecasts and we're ready to move on to our returns analysis.
Interest Expense Empty
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