How to factor in deferred tax asset/liability in a DCF?
I'm coming across this problem where there is a deferred tax asset/liability in projections. Anyone have any insight on how to handle this? My three options:
1.) Project as a percent of revenue and just keep constant 2.) Project as decreasing over the projection period - reasoning: my thinking is that the deferred tax asset/liability will have decrease over time since the business will have to pay these taxes at some point (unless they could, for example, just keep on deferring the same amount of taxes each year) 3.) Try to figure out how to calculate how much cash they are paying in tax each year instead of a marginal tax rate as a percentage of revenue and project that forward - this seems like the best way to do things but I'm not sure of the mechanics on this. Would I just add/subtract any decrease/increase in the deferred tax liability as well as increases/decreases (ex. Excess tax benefit from SBC)
I'm a student, so if any professionals have industry insight on this, I'd love to hear it.
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