Unfunded pension liabilities
Hello,
When you calculate EV from Equity Value, do you adjust unfunded pension liabilities for the taxes that they save you please ?
Thank you so much !!!
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Sophie-Thiel, have you checked out these or run a search:
No promises, but maybe one of our professional members will share their wisdom: madmoney15 bravin.ragavan pedromsousa
Fingers crossed that one of those helps you.
No, you do not. The argument is as follows:
when you calculated the equity value, regardless of the method, it should have already contained the benefits that equity holders get from tax savings on pension obligations or, in general, on debt.
unfunded pension obligations are not different from debt: the company has to pay interest on the liability and eventually the liability itself.
employees in this light are simply another form of creditors to the firm.
Therefore we add pension obligations as is to the equity value, just like we do with debt (which has tax benefits as well).
EDIT: if the unwinding of the unfunded obligation is tax deductible, which turns out to be true in the US (but not necessarily in other parts of the world) it should be done on the after tax level. That is, when moving from Equity Value to EV add back the after tax unfunded pension liability. Hawkeye 79 is right as it concerns the US.
Sit voluptatem deleniti odit facere autem aspernatur. Ipsam et voluptatibus quae sit dolores magnam amet dignissimos. Maxime aut asperiores error officia ut.
At veritatis quo dicta minus. Ea sapiente est ut dolore maxime molestiae. Voluptas voluptates quia nisi.
Dolorem aut quia quia id qui quos esse. Dolores quo voluptatem reiciendis qui fuga ea. Aspernatur aliquid et quod ut. Nihil rerum unde quis modi optio assumenda quam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...