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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?!
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!
__________________ Blain Reinkensmeyer
Founder, stocktradingtogo.com
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