Best Response

You add back the depreciation expense in the CFO. Sure your NI is going to be lower with DDB, but it doesnt matter because you are going to add back a greater portion of that in the cash flow statement.

As far as your taxes payables, you will be paying less taxes with DDB, but it doesnt matter as far as modeling goes because they will converge anyway. Here's another way to think about it -

EBITDA (same under both) DA (higher for DDB) EBIT (higher for SLN)(no effect on CFO) I (same for both) T (higher for SLN, use of cash) NI (higher for SLN)

Then on the CF statement,

NI (higher on SLN) add back D (lower than DBB) Taxes payable (bigger outflow than DBB - intially)

Point is, the non-cash nature of the depreciation has very minimal effects on the CFO, and is pretty irrelevant in modeling

 

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