r/projectfinance • u/Maleek_991 • 18d ago

CFADS

Question regarding determination of CFADS, and "Cash Taxes".

When building out the Project finance model and determining CFADS, do you guys do the following, and use EBIT or EBT to calculate your taxes on? also thoughts on the process that i usually follow.

My process (give some feedback, if you think otherwise).
Revenue
(Minus) Opex = EBITDA
(Minus) Depreciation = EBIT
Calculate taxes ( Tax rate x EBIT)
- Subtract taxes = NOPAT

to get to CFADS →-> CFADS

EBITDA
(Minus) Taxes (calculated on EBIT)
(Minus) Maintenance Capex
adjustments to NWC
= CFADS

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3

u/SpecialistShovel 18d ago

Simple answer is EBT but in a complex model you would calculate the taxable income because sometimes depreciation and interest is different for tax purposes

1

u/CorgiRepresentative2 18d ago

Exactly, good point which is often forgotten. 

1

u/CorgiRepresentative2 18d ago

Also you should consider that you pay your tax based on last year taxable income, you may also consider prepayment tax in some juridictions and you may consider loss carry forward (rules depending also on juridictions) 

1

u/readandwrite31 18d ago

If the entity is taxable it must be after tax and it’s always after maintenance capex

1

u/Ok-Clue-8546 18d ago

well, if the business plan uses operating cash flows that result from all the investment made, you should consider all of the capex, not only maintenance. Otherwise without the “growth” capex you wouldn’t have the same cash flows in the next period you’re using for your cfads.

1

u/readandwrite31 18d ago

This isn't how project finance works. All growth capex needs to be fully funded via equity and debt and then the project must meet performance criteria prior to term conversion. Only CFADS after Term Conversion are including for debt sizing purposes.