Wall Street Prep
The Impact of Tax Reform on Financial Models

The Impact of Tax Reform on Financial Models

Understand the impact of TCJA (2017 Tax Reform) on DCF, LBO, M&A and Financial Statement models that investment bankers and private equity professionals use to analyze transactions

Understand how to modify pitchbook and deal models to reflect tax reform

TCJA impacts far more than the headline tax rate reduction. This course shows investment bankers and private equity professionals how the financial models they use to support M&A and LBO transactions need to be revised to reflect new limits on interest expense deductions, bonus depreciation and changes to NOL rules.

What You'll Learn

Part 1: Financial Statement Model Impacts
  • Overview of the Changes in TCJA
  • Modeling Bonus Depreciation
  • Modeling Interest Carryforward Limits
  • Modeling EBIT and EBITDA Tests
  • Modeling NOL Limits
Part 2: Valuation Model Impact
  • Overview of Tax Reform Impact on Valuation
  • Adjusting Free Cash Flows, WACC and Terminal Value Calculations for TCJA
  • How to Deal with NOLs and Carryforwards
Part 3: M&A and Private Equity
  • Impact on LBO Models
  • Impact on M&A Deal Structures

Course Samples

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Tax Reform Headlines
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Headline 1: Lower Tax Rate
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Headline 3: Limit on Interest Deduction

Wall Street Prep’s "The Impact of TCJA on Financial Models" is used at top financial institutions and business schools.

Course Extras

  • Taught by bankers

    Our instructors are former investment bankers who give lessons real-world context by connecting it to their experience on the desk.

  • Used on the Street

    This is the same comprehensive course our corporate clients use to prepare their analysts and associates.

  • Macabacus Excel Plugin

    6-month free access to the full version of Macabacus — an all-in-one suite of time-saving tools designed for people who build financial models in Excel.

  • Free Unlimited Access to the WSP Support Center

    Receive answers to questions, free downloads, and more from our staff of experienced investment bankers

Prerequisites

This course assumes basic familiarity with financial modeling, LBO and DCF analysis. Students with no prior background in financial modeling should enroll in the Premium Package prior to taking this course.

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Course Syllabus

Tax Reform Overview
1 TCJA Introduction 1:14
2 Tax Reform Headlines 4:22
Impact on Financial Statement Models
3 Headline 1: Lower Tax Rate 3:12
4 Headline 2: Bonus Depreciation 6:26
5 Bonus Depreciation: Model Impact 12:56
6 Headline 3: Limit on Interest Deduction, Part 1 4:02
7 Calculating EBITDA and EBIT 1:41
8 Limit on Interest Deduction: Model Impact 5:51
9 Interest Carryforward 3:55
10 Connecting the Carryover Schedule to the Model 4:35
11 Headline 3: Limit on Interest Deduction, Part 2 1:20
12 Headline 4: NOL Limits 1:58
13 NOL Limits: Model Impact 8:40
14 Putting it Together: Tax Savings vs Pre-TCJA 6:26
Impact on Valuation Models
15 Tax Reform's Impact on Valuation 4:11
16 Tax Reform's Impact on the Stage 1 DCF 3:50
17 Tax Reform's Impact on WACC 1:32
18 Tax Reform's Impact on Terminal Value 3:53
19 Normalizing Terminal Year Cash Flows 3:59
20 Exit Multiple Requires No Change 0:24
21 Dealing with NOLs and Carryforwards 2:00
22 How to deal with NOLs 5:08
23 How to Deal with Carryforwards 13:14
24 Putting it Together: NOLs and Carryforwards 1:43
25 Summary: Tax Reform's Impact on the DCF Model 2:08
Impact on LBO and M&A Models and Deal Structure
26 Tax Reform's Impact on the LBO 5:33
27 Tax Reform's Impact on the LBO: Getting into the Model 8:55
28 Tax Reform's Impact on Deal Structuring 10:50
29 Tax Reform's Impact on M&A 16:55
30 Putting it Together: Tax Reform's Impact on M&A 3:18
Appendix: Q&A
31 Q&A: TCJA Impact on Valuation 6:46
32 Q&A: Handling the Remainder of Bonus Depreciation 0:38
33 Q&A: EBITDA/EBIT Toggle 0:44
34 Q&A: What Happens to Carryover if Tax Expires? 1:04
35 Q&A: Tax Reform's Impact on Merger Modeling 1:56
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