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Dear Sir,
Thank you so much for the free lecture which really helpful!
Just one question on Example 5 Chapter 10 – EVA:
When calculating adjusted profit for EVA, we add back “after tax interest”, but “before tax non-cash expenses”. Just wonder why there is no need to exclude the tax benefit on non-cash expenses. Why we use different tax approach towards interest expenses against non-cash expenses?
Hope to hear from you soon. Thank you!
Best regards,
MusicWhereas interest definitely attracts tax relief, it is unlikely that non-cash expenses would. The reason for adding these back is that they are not ‘real’ expenses, so are therefore unlikely to be allowed for tax.
Got it, like provisions, accrued expenses – non deductible for tax purposes.
Thank you very much!!
Have a nice day:)
Sorry, one more question:
in this case, is it need to be added back to capital employed?
Thanks!If these are not real expenses then retained earnings would be greater.
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