Question for the valuation junkies out there:
I'm valuing a biotech firm and would like to capitalize r&d expenses.
How should this affect the DCF valuation?
I'm assuming that, in any given year (in the forecast period), I should:
-Add back R&D expense to EBIT
-Subtract R&D amortization from EBIT
-Assume taxes aren't affected
-R&D expense at t0 is subtracted from free cash flows (same treatment as CAPEX)
Am I forgetting anything?
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if you are running everything on a cash basis, why would you double count the R&D Amort and the capex?
come on now...
well atleast add back the amort when you calculate FCF, I assumed you were just subtracting it.
accounting wise i am not sure you can capitalize these cost, unless this is purely R&D shop, that plans to sell this product once its completed,
GAAP - can't capitalise R&D unless software, biotech etc..
IFRS - can't capitalise R but can D
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