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.
EBIT(1-T)
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?