FCFF (depreciation add back)

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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November 17, 2020 at 5:23 pm #595336
HighFive
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Dear sir,
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
November 18, 2020 at 8:44 am #595388
John Moffat
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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.
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