How Tax Rate affects Enterprise Value (EV)
I have some questions on an undying topic that's continuously discussed on the street: how tax rate affects EV valuation of companies. Some people argue it's positively correlated to EV while others argue it's the opposite.
Based on my experience/observation, I think it's positively correlated especially when using unlevered DCF and simple EV formula. In the former case, increase in tax rate decreases WACC (EV goes up). And also in the latter case, cash and cash equivs go up as tax rate goes down (EV goes down).
I heard some people saying it depends on valuation methodologies, so I wanted to hear your opinions. Has anyone observed clear relationship b/w tax rate and EV using multiple, comps, or previous transactions? What are your thoughts in general? Thanks for your insight in advance.