In the unlevered DCF, EBIAT equals EBIT multiplied by (1 minus tax rate)?

In the unlevered DCF, EBIAT equals EBIT multiplied by (1 minus tax rate)?

• A. True
• B. False
• C. Not enough information
• D. Sometimes true

Answer: (A)

In an unlevered DCF the focus is on operating profits after tax, without any effect from financing. EBIAT, often used to mean earnings before interest after tax, represents the after‑tax profit from core operations and excludes interest. Since taxes are applied to operating income, EBIAT equals EBIT times (1 minus the tax rate). This is the standard way to convert operating income to after‑tax operating profit in an unlevered model, which then feeds into unlevered free cash flow after adjusting for depreciation, capex, and changes in working capital. So the statement is true. In typical cases, it wouldn’t be not enough information or sometimes true, because the relation EBIT × (1 − tax rate) directly yields the after‑tax operating earnings used in an unlevered framework.

In an unlevered DCF the focus is on operating profits after tax, without any effect from financing. EBIAT, often used to mean earnings before interest after tax, represents the after‑tax profit from core operations and excludes interest. Since taxes are applied to operating income, EBIAT equals EBIT times (1 minus the tax rate). This is the standard way to convert operating income to after‑tax operating profit in an unlevered model, which then feeds into unlevered free cash flow after adjusting for depreciation, capex, and changes in working capital.

So the statement is true. In typical cases, it wouldn’t be not enough information or sometimes true, because the relation EBIT × (1 − tax rate) directly yields the after‑tax operating earnings used in an unlevered framework.