Discounted After-Tax Cash Flow

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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.

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