Hello everyone. Just a quick question on the FCFF/DCF. Let's say my company has some one-offs above EBIT so: some restructuring fees / legal fees / or asset impairments. Do I need to use adjusted EBIT for NOPAT calcs? Or just adjust below as add-backs?
Does it change when we know for example that asset impairments will continue for 3 years? Do we add it back or just go with the usual EBIT => NOPAT => FCFF?
Thanks.
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anybody pls?
Not really clear on exactly what you’re asking but you’d make your EBITDA adjustments after you reach unadjusted EBITDA the normal way. Don’t want any implications on your tax calculations by adding back one time charges.
Thanks. The question really is - should I just:
1. Use GAAP EBITDA and do not add back anything beyond D&A
2. Use Adjusted EBITDA and do not add back anything beyond D&A
3. Use GAAP EBITDA and add back the restructuring charges at the cash from operations level, etc.
I guess your answer is 2)
Only add back non-cash expenses (ie impairment charges). Don’t add back the legal/restructuring fees as those are cash outflows. If you add them back you will be overstating the value in the DCF.
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