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Hi Ken,
I’ve done a few EVA questions and I’ve come across in some questions where the tax expense is deducted from the operating profit in order to calculate NOPAT. Is this the right thing to do? If it is, then in such a situation, is deducting lost tax relief on Interest charge applicable. Very confused about these 2 things.
Hi Amber
ive noticed its not the tax expense being deducted but instead the tax paid that is deducted.
Ken will be able to assist more.
NOPAT is always after tax (that’s what the ‘AT’ part means). In the calculations, it depends where you start. If you start with profits before tax and interest, then tax still has to be deducted. If you start with profits after tax and interest, tax does not have to be deducted, but interest (net of tax) has to be added back.
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