Assuming a new accounting rule allows capitalisation of R&D, and your firm is investing heavily in R&D, what would be the effect on firm value?
Came across this in an old forum post (about 10 years back) and wasn't answered particularly definitively. I think the net cash position on CFS remains the same, but if capitalised, your firm value increases from the tax deductibility of R&D? Sort of like D&A? I think I may be on the right track with the comparison to D&A, but it'd be great if someone could clearly outline the impact on valuation.
EDIT: Okay I just had a think through it, and I think that it will reduce firm value because you lose out on the tax deductible effect of having it embedded in your SG&A, in the case of an unlevered FCF, and instead incurring the full cost on your cash flow for that year. Would this be correct?