During my studying i always calculate FCFF just mechanically, but today i started to think, why do we have to add interest adjusted on tax, rather than just interest.
As far as i know, we do not pay tax on interest, but we pay tax on principal(for example: amortized bank loan, TLA), i’m i wrong?
My question: In the table below, why do i have to add int*(1-t), in my case - $18 instead of $30(interest). I can’t understand: we adding back $18, but we still have to pay $30! i’m tolking about interest, not principal.
FCFF - it is cash available for the all(debtholders, stockholders), before we were been able to pay $30 interest, but after adding back interest*(1-tax) we can pay only $18 = 30*(1-40%).
I’m so confused((.
Please hepl me, Thanks in advance!
Here, I’ve made the table: tax - 40% By the way, I would apperiate if someome tell me how to create Table
Revenue 400 - COGS 150 = Gross Profit 250 - OpEx 100 - SG&A 20 = EBITDA 130 - D&A 50 = EBIT 80 - Interest 30 = EBT 50 - Tax 20 = Net Income 30 + D&A 50 - CapEx 40 + Interest*(1-t) 18 - Increase in NWC 10 = FCFF 48