I know this sounds a bit silly at this stage.
What happens if u are required to calculte NOPLAT and the deferred tax asset is shown instead of a liability?
Do we subtract it instead of adding it in the formula given below?
NOPLAT=Unlevered NI+change in deferred tax.
If yes, could someone guide me with the logic behind this for the sake of memory retention.
You are looking for the unlevered earnings of the firm basically, you use this in the EVA calc which is NOPAT x $WACC so you want it to be unlevered as you are using the cost of capital for the firm not equity
I also thought of NOPAT but then realized why does the CFAI bother with two different terms? NOPLAT shows in the M&A section and now I am confused…
different writers in the sections could just be a continuty error, or maybe im completely missing something?