Is it safe to assume that the “depreciation” included in the FCFF formula is tax allowable(aka same as capital allowance)?
because the depreciation is added back in full amount which confuses me as depreciation should not be taxable and therefore be added back at its post tax amount after the PAT figure
The rules for calculating the tax allowable depreciation are given in exam questions. The TAD is subtracted to get the taxable profit on which the tax is calculated, but is then added back because it is not a cash flow.