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Is tax allowable depreciation a cash out flow for calculation of free cash flows ?
Also, for calculation of EVA we add up depreciation for NOPAT will tax allowable depreciation be taken as economic depreciation for its calculation ?Thank you.
Tax allowable depreciation is never ever a cash outflow. It is only needed for the calculation of tax.
With regard to EVA, then yes – in exams we assume that the two are the same (even though in practice they would not be).
So for calculation of EVA you would deduct tax allowable depreciation treating it as economic depreciation for NOPAT ?
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