DEFINITION of 'Discounted After-Tax Cash Flow'

An approach to valuing an investment that looks at the amount of money it generates and takes into account the cost of capital and the investor's marginal tax rate. Discounted after-tax cash flow is similar to simple discounted cash flow (DCF), but tax implications are also taken into consideration. Because there are many different methods for valuing an investment, and each method has its shortcomings, investors should not rely solely on discounted after tax cash flow to make a decision.

BREAKING DOWN 'Discounted After-Tax Cash Flow'

For example, discounted after-tax cash flow can be used in real estate valuation to determine whether a particular property is likely to be a good investment. Investors must consider depreciation, the tax bracket of the entity that will own the property and any interest payments when using this valuation method. To examine the property's value from multiple perspectives., you can also use other methods of real estate valuation such as the cost approach, sale comparison approach and income approach.

RELATED TERMS
  1. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  2. Discounted Cash Flow (DCF)

    Discounted cash flow (DCF) is a valuation method used to estimate ...
  3. Discounting

    The process of determining the present value of a payment or ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, ...
  5. Rate Of Return

    The gain or loss on an investment over a specified period, expressed ...
  6. Direct Method

    A method of creating a statement of cash flows during a given ...
Related Articles
  1. Investing

    Top 3 Pitfalls Of Discounted Cash Flow Analysis

    The DCF method can be difficult to apply to real-life valuations. Find out where it comes up short.
  2. Investing

    Should You Use DCF for Valuation?

    We explain the two primary valuation techniques—DCF and Comparables—used to predict future stock prices.
  3. Investing

    Value Investing: Why Investors Care About Free Cash Flow Over EBITDA

    Examine value investing philosophy and methodology to see why free cash flow is more important than EBITDA in pure intrinsic value calculation.
  4. Investing

    How To Choose The Best Stock Valuation Method

    Don't be overwhelmed by the many valuation techniques out there - knowing a few characteristics about a company will help you pick the best one.
  5. Investing

    Evaluate Stock Price With Reverse-Engineering DCF

    This is a more accurate method to use when trying to find a target price for a stock.
  6. Investing

    Cash Flow From Investing

    Cash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
  7. Investing

    How To Value A Real Estate Investment Property

    Make sure you know what your real estate investment is worth before you sign the ownership papers.
  8. Investing

    Taking Stock Of Discounted Cash Flow

    Learn how and why investors are using cash flow-based analysis to make judgments about company performance.
  9. Investing

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  10. Investing

    DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.
RELATED FAQS
  1. How do I calculate free, discounted and operational cash flow in Excel?

    Take a quick look at how you can calculate a company's operating cash flow, free cash flow and discounted cash flows using ... Read Answer >>
  2. How do you use DCF for real estate valuation?

    Learn how discounted cash flow analysis is used for real estate valuation and the various factors that go into calculating ... Read Answer >>
  3. Why would you take DCF into account rather than simply projecting future revenues?

    Learn what discounted cash flow analysis is and why it is considered a better equity valuation tool than simply projecting ... Read Answer >>
  4. When and why should the terminal value be discounted?

    Find out why investors use the terminal value, why the terminal value is discounted to the present day, and how it's related ... Read Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Understand the meaning and significance of discounted cash flow, and learn how market analysts commonly use this stock evaluation ... Read Answer >>
  6. What is the formula for calculating free cash flow?

    Read about some of the formulas for free cash flow, why investors perform cash flow analysis and what a high or rising cash ... Read Answer >>
Hot Definitions
  1. IRS Publication 970

    A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  4. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  5. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  6. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
Trading Center