Gambit Enterprises is being evaluated as an acquisition target. For the upcoming year an analyst has estimated the following values: net income = $300m, net interest after tax = $100m, change in deferred taxes = +$25m, depreciation = $200m, change in net working capital = +$30m, CAPEX = $250m. Calculate the firm’s estimated free cash flow. A) $345m. B) $405m. C) $145m. D) $295m. Answer: A Why do we add back deferred taxes when calculating NOPLAT?
if deferred tax liabilities will not reserve, the increase in deferred tax liabilities should be added back to net income.