smuggycfa

verse is right in his explanation.

It might be helpful if you do the math:
FCFF = [EBIT x (1-tax rate)] + DEP - FCInv - WCInv =
= [(OPERATING CASH - DEP) (1-tax rate)] + DEP - FCInv - WCInv =
= OPERATING CASH(1-tax rate) - DEP + DEP * tax + DEP - FCInv - WCInv.

After you eliminate the DEP, you are left with the OPERATING CASH after tax + cash tax that was saved due to depreciation.



Edited 1 time(s). Last edit at Tuesday, April 19, 2011 at 06:44AM by kyrylo.