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The thing is that depreciation is not a cash expense, companies will push the depreciation to the highest reasonable amount to reduce the amount of tax on their
by Rastonbury 7y ago
The thing is that depreciation is not a cash expense, companies will push the depreciation to the highest reasonable amount to reduce the amount of tax on their profits.
A commonly used valuation technique (discounted cash flow or DCF) relies on projected free cash flows and adjusting for expected CAPEX.
- formercoder 7y agoAlso there’s GAAP depreciation and tax depreciation, and firms will try and use different depreciation schedules between the two in order to create deferred tax liabilities which boost cash flow early on.