Discounted After-Tax Cash Flow

AAA

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.

INVESTOPEDIA EXPLAINS '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. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  3. Cost Of Capital

    The required return necessary to make a capital budgeting project, ...
  4. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  5. Weighted Average Cost Of Capital ...

    A calculation of a firm's cost of capital in which each category ...
  6. Asset Valuation

    A method of assessing the worth of a company, real property, ...
Related Articles
  1. Fundamental Analysis

    Analyze Cash Flow The Easy Way

  2. Markets

    Valuing A Stock With Supernormal Dividend ...

  3. Markets

    Operating Cash Flow: Better Than Net ...

  4. Markets

    What Is A Cash Flow Statement?

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center