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Sir,
1. While calculating the taxation why did we have to exclude interest from the profit ? The interest on loan was not included in the operating profit anyway. The interest on loan was later showed separately then why was the taxation charged as (operating profit – interest) * tax rate ?!2. Would it be a wrong proforma if I deducted investement on current assets first and then subtracted interest ?
1. You are asked for the free cash flow to equity, and so interest is subtracted. Interest is allowable for tax and so it is deducted before calculating the tax.
2. I assume you actually mean investment in non-current assets. If so then it would be wrong. The investment is not tax-allowable, only the depreciation is tax allowable.
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