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Project costs $100 million. If you get a loan for $100 million and you don't capitalize interest, your depreciation is $10 million (straight line, 10 years). EBIT= -$10 million.
If you calitalize interest, your asset is say $140 million, depreciation is $14 million. Your EBIT=-$14 million. EBIT under capitalized interest is lower.
No? |
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