Free Cash Flow and Stock Option
I am in the early stages of learning DCF valuation, and have a quick question when determining part of the FCF of a public company. Specifically, how should I treat stock based compensation expenses when calculating NOPAT?
For example purposes, let's say I have a company with the following metrics:
Sales = $100
COGS = $50 ($2 of stock based compensation is in COGS)
SG&A = $30 ($3 of stock based compenssation is in SG&A)
Should my EBIT be adjusted for the stock based compensation (strip it out), resulting in EBIT of $25? If so, do I then need to add back the $5 in stock based comp like D&A after calculating NOPAT?
Any guidance would be greatly appreciated.
just exactly the same question I had
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