Adjusted Present Value, which Tax?

[MauriceZwoDrei]

Hi guys,

is it appropriate to use the average tax rate when computing the cash flows of an investment project? (e.g. in the Adjusted Present Value-Approach)
When the tax rate changes because of the capital structure of your business (e.g. M&A), you shouldn't use the old tax rate,you should use eather the average or an estimated future tax rate, is this right?!

Thank you guys!
Greetings from Germany

[Stocktrading101]

Hi Maurice,

This is a tough question but if I had to guess I would say that if tax rate changes because of the capital structure you should use the new tax rate, not the old. I would double check with an accountant though to clarify!