After Tax operating CF Formula

[Snah]

Hi All,

I hope you had a great weekend,

I am reviewing the whole Corporate Finance, and I am finding an issue with the after tax operating CF formula,
we should operate with both indistinctly; and I trend to use (S-C)(1-T) + DT but I have found some problems in which this one gives you a different result than (S-C-D)(1-T) + D.

For example, in the CFA insitute curriculum, Reading 23 exercise number 27, if you use the 1st i have mention the result is 0.34 but using the 2nd the result is 0.31 which is the correct one.

I would like to know when I have to use one or the other, I am quite confused

Thanks

S

 

[S2000magician]

Algebraically, they’re identical:
(S − C − D)(1 − t) + D
= (S − C)(1 − t) − D(1 − t) + D
= (S − C)(1 − t) − D + tD + D
= (S − C)(1 − t) + tD
If you’re getting different results, rest assured that the error lies with you: you messed up on something.
Use whichever you prefer.

 

[Harrogath]

S2000 is right, check the numbers again.

 

[olajideanuoluwa001]

they give you the same answer, so check your numbers.