Is NOPAT always EBIT (1-T)? The silly CFAI book has this as the equation in one place and EBIT(1-T) + Increase in Deferred taxes in another… Which is correct? Also for Residual Income do we ALWAYS pick the NI after taxes number and subtract Equity Charge or is there an adjustment for deferred taxes? I’m thinking it should ALWAYS be NI - Equity Charge (with the clean surplus relationship assumption and all!) Jay.

There are some adjustments to be made to come to RI like adding NCC or something like that. Haven’t seen any problem where they asked exactly to adjust that.

i have always seen NOPAT as EBIT (1-T); [EVA = NOPAT - WACC]… But i guess if deferred taxes are unlikely to reverse you can count as part of your NOPAT? hopefully wont show up…

NCC? Why on earth would you add NCC? You’re not doing an accrual based calc not cash based…

I meant something related to amortization and deferred taxes. Don’t remember exactly. Open your book if you have with you and post for everyone.

do you guys mean this? nopat = ebit (1-t) noplat = ni+net interest after tax +change in deferred taxes

see that, the second formula i am not familiar with… i have made note

Barthezz: OK so both equations seem the same… I’ll stick to Ebit (1-t) … Should be + increase in deferred taxes btw (decrease would be a -) Jay.