The doubt is from free cash flow valuation chapter.
FCFF=NOPAT-Net Investment
where NOPAT=EBIT(1-t)
In calculation of NOPAT, we apply the tax rate on EBIT but accounts wise we apply tax rate on Profit Before Tax(PBT).So, in this way, the tax amount will be higher in former case than later one. Why we apply tax rate on EBIT rather than on PBT?
Please think like an analyst/investor and not like an accountant.
You are sitting with the financial statements.
Your goal is to get to the Free Cashflow figure.
You’ve got many ways to do that.
You may start with Net Income ie PAT and add depreciation and other non cash expenses/subtract non cash gains to get to CFO and finally to FCFE/FCFF.
You may start with EBIT, make it post tax, reach CFAT/CFO and once again finally to FCFE/FCFF …..both gives the same conclusion.
Different approaches, same conclusion.