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Sir, May i ask when want calculate for free cash flow, the depn is adding into right?
From this question is it minus the tax allowable depn?
May i ask is it the treatment between TAD different with depn in FCF?
Thank youThere is no difference in the treatment.
Tax is always calculated on the taxable profit, which is after subtracting the TAD.
However since the TAD is not a cash flow, we would then add it back except for note (vi) of the question. There are a cash outflow equal to the amount of the TAD in order to maintain operations – therefore we do not add it back.
The examiner often includes that note in both FCF questions and in investment appraisal questions (and I do explain this in my free lectures).
Sir, if I using the another method not the deduct then add back but is work out a tax relief in then add back to cash flow .
How do I need to do for deal in this situation?
Thank youYou always have to subtract the TAD in order to calculate the tax payable. That is a tax rule.
If it was not for the note that I mentioned in my previous reply, then you would then add back the TAD because it is not a cash flow.
It is exactly the same approach for FCF questions and investment appraisal questions.
You always have to subtract the TAD in order to calculate the tax payable. That is a tax rule.
If it was not for the note that I mentioned in my previous reply, then you would then add back the TAD because it is not a cash flow.
It is exactly the same approach for FCF questions and investment appraisal questions.
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