Double counting of Tax shield and free cash flow
Hi Friends,
FCF=EBIT*(1-Tc) + Depr. - Capex - WC
My understanding is that interest expense impacts the tax amount. However, here in FCF formula, we don't account the Tax shield because we are going to discount the FCF by the WACC that already factors in the impact of tax shield and thus we are avoiding double counting of tax shield.
My questions are 1. is the FCF figure here standalone the real amount of Free cash flows from operations? or should it be the following: FCF = Net Income + Interest expense + Depr - Capex - WC (note that I used "Interest expense" and not "interest expense*(1-T)
- Suppose I want to use WACC= Re *We + Rd *Wd (without factoring in the tax shield impact), what FCF formula should I use then.
Thank you
Odio fugiat ad accusamus. Dolores et atque laudantium quis accusantium fugit. In dolores incidunt rem eos quia sequi architecto.
Vitae sit enim ea ipsum asperiores quam reiciendis. Pariatur nostrum qui necessitatibus quod. Soluta et possimus laborum distinctio voluptas.
Modi velit perspiciatis reprehenderit laudantium. Voluptas accusantium quae reiciendis vero quis nostrum. Officia tempora qui culpa ipsam incidunt. Vero adipisci sed quas quos velit dolorum beatae. Error voluptates voluptas et molestias. A qui in accusamus qui aliquid eveniet quidem. Repudiandae qui quo nesciunt veniam ut doloremque et.
Nobis autem quibusdam similique consectetur totam harum corrupti sequi. Neque aut a accusamus repudiandae incidunt id voluptatem. Tenetur nulla nesciunt accusantium error eaque. Perspiciatis eum non aperiam temporibus maxime est.
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...