Session 9: Tax rates, Cap Ex and Working Capital
from Aswath Damodaran Hosted by Aswath Damodaran
In this session, we began by continued with our discussion of why we capitalize lease commitments and R&D expenses, and how they affect valuation inputs. We continued our discussion of cash flows, by first putting to rest some final issues on earnings, including the tax rate to use in computing after-tax cash flows and dealing with money losing companies. In the process, we did look at what to do about accounting fraud, and while the answer is not much, there may be a role for forensic accounting. To be honest, most forensic accounting books are designed for valuation morticians, but here are a couple that you may find useful:http://www.amazon.com/Financial-Shenanigans-Accounting-Gimmicks-Reports/dp/0071703071/ref=pd_sim_b_8 http://www.amazon.com/Creative-Cash-Flow-Reporting-Sustainable/dp/0471469181/ref=pd_sim_b_2Finally, if you want to take apart a company’s financial statements, looking for clues on profitability, you might find my most recent data update post useful:https://aswathdamodaran.blogspot.com/2025/02/data-update-7-for-2025-end-game-in.htmlStart of the class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/tests/cftests2.pdfSlides: https://nyu.box.com/s/3nwim0nfnm9uuuvsl1lzzqifr06sd9orPost class test: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Btest.pdfPost class solution: https://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session9Bsoln.pdf
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