Hello,

I have to value a company as of September 2008. The company reported that it went through a big restructuring in 2008 in its half-year report. I have read in your book that I should neglect this in forecasting my earnings if I assume this is a one time issue. However, it certainly does have an effect on 2008s actual cashflows (at least through tax effects). And I want to forecast the cashflows for the last quarter of 2008 also. So how do I deal with this? I can hardly neglect that the firm probably does not have to pay taxes for 2008 and that it can probably carry losses forward for a

Question

Hello,

I have to value a company as of September 2008. The company reported that it went through a big restructuring in 2008 in its half-year report. I have read in your book that I should neglect this in forecasting my earnings if I assume this is a one time issue. However, it certainly does have an effect on 2008s actual cashflows (at least through tax effects). And I want to forecast the cashflows for the last quarter of 2008 also. So how do I deal with this? I can hardly neglect that the firm probably does not have to pay  taxes for 2008 and that it can probably carry losses forward for a

anonymous · Answer

few years and therefore reduce its tax rate. So I am not sure if I got something wrong but I would either include 1/4 of the restructuring charge in my cashflow forecast for the last quarter or just act like nothing happened (but adjust the tax rate). Probably the latter ...

Thank you.