Discounting After-tax CF with After-tax discount rate
Hey guys,
I am confused. I found some training questions in which I have to discount cash flows. The solutions discount the calculated after-tax cash flows by a tax-adjusted discount rate, but aren't we double-counting the tax impact then?
Example: After-tax CF y0: -3000 (Investment) After-tax CF y1: 600 After-tax CF y2: 1556 After-tax CF y3: 1132,4
Discount rate: 10%, tax rate: 60% Therefore, adjusted discount rate: 1+(0,1(1-0,6)) = 1,04 NPV (tax adjusted): 22,23..
But I would have discounted with 10% as we already incorporated tax effects in the after-tax CFs. Where am I wrong?
Thank you guys
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