Sir
i think i got it now. If it is PBDIT then we just deduct the tax first and the depreciation gets deducted after that if the assets are being replaced plus additional assets. If no replacement of assets we do not deduct the depreciation after tax. If PBIT we add the depreciation, deduct the tax and then deduct depreciation again if replacing. Tax on interest?????? Or do we have to have NOPAT specified? Or de we do nothing about interest at all, tax or interest?
Ask the Tutor ACCA AFM
Doric 2 FCF
8y ago#1I really do not understand what you are asking.
Tax is calculated on the profit after subtracting tax allowable depreciation (capital allowances).
Interest (and the tax relief on interest) is ignored when calculating free cash flows, because discounting at the WACC is accounting for the interest.
It might help you to watch the Paper F9 lectures on investment appraisal with tax.
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