UFCF cash taxes - implied rate vs absolute cash taxes

A simple, but important calc has sparked an interesting discussion: how does one derive the cash taxes or impled cash tax rate for the UFCF calc?

  1. Simply take absolute cash taxes from CF statement
  2. Take implied tax rate from income statement and apply it to EBIT

Any thoughts?

Comments (8)

Nov 22, 2018

Anyone?

Nov 22, 2018

bump - thanks

Nov 23, 2018

[Content removed]

Numbers are history, and businesses are historians.

    • 2
Nov 22, 2018

I had a question.

Nov 23, 2018

It would just be tax provision +/- change in deferred tax. Given that that you are looking at FCF on an unlevered basis, you would then need to eliminate the tax shield from any debt or interest income. This gets you your cash taxes paid as if the company was all-equity financed.

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Nov 24, 2018

When project UFCF you need to remember that you would tax affect your EBIT by the current marginal tax rate (the %age taxes paid on the last dollar of taxable income) and not the firms effective tax rate (accrual taxes paid/accrual taxable income)

    • 1
Nov 28, 2018
sa-jue:

A simple, but important calc has sparked an interesting discussion: how does one derive the cash taxes or impled cash tax rate for the UFCF calc?

  1. Simply take absolute cash taxes from CF statement
  2. Take implied tax rate from income statement and apply it to EBIT

Any thoughts?

Yes that's right

Nov 28, 2018
Comment