Hi everybody,
Concerning the DCF method, could you please tell me why do we substract taxes from EBIT and not from EBITDA or Net Income or any other item ?
Many thanks
| +197 | Americas M&A League Table Q2 Updated | 79 | 3h |
| +131 | Restructuring: Anti-climactic Experience | 34 | 1d |
| +101 | IB Net Worth / Savings Check | 48 | 32m |
| +91 | Woman who emptied Knicks trashcan on street then stole it was DEI exec, worked at JPMorgan Chase | 24 | 13h |
| +80 | Stop sleeping on UBS - it’s pretty good | 26 | 2h |
| +52 | 2026 VAULT PRESTIGE RANKINGS | 29 | 1d |
| +39 | AI + Financial Modelling | 12 | 1d |
| +28 | Summer before college | 17 | 13h |
| +28 | Hardest interview experiences? | 16 | 22h |
| +26 | Current State of UBS in North America | 8 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
If you subtract it from EBITDA you get to EBIDA as T stands for taxes. You subtract T(axes) and (I)nterest from EBIT to get to net income, which is below the tax line.
Thank you Patrick Batman, but I don't understand the rationale behind this. Why don't we simply start from the Net Income to calculate the FCF ? Because I believe that interest expenses are cash out items and if we start from the EBIT it doesn't take into account this
Because the FCF you calculate is FCF to firm and not FCF to equity. Net income only reflects equity.
Why do we want to calcule the FCF to firm and not FCF to equity ?
Have you gone through a step-by-step guide for DCF?
You value the firm, this is why you divide FCF by WACC and not cost of equity. Just in the end, when you have the EV you do a bridge back to get to the EqV.
Animi vel quasi quo nesciunt blanditiis vel. Aut et recusandae sit quia et eligendi corrupti ipsam. Aperiam et dolor non. Nihil voluptatem quis consequatur repellat.
Aspernatur rem sit totam ea atque et quaerat. Temporibus error deleniti ad debitis omnis sit nihil. Eum aliquid non incidunt. Non quia perspiciatis necessitatibus deleniti.
Soluta perferendis quia veritatis ut. Earum recusandae soluta nobis consequatur. Perspiciatis quia sed quaerat ullam et est. Deserunt nostrum doloremque quaerat animi nihil accusamus velit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...