Backing out corporate and personal tax.
Hello, I have a question on why we use (1-taxrate) to back out taxes. When we applied the tax we did (yield required)*(taxrate). It seems like to back out the tax we would have to divide by just the tax rate. I'm sure their is an intuitive reason but I don't see it.
Comments
The yield is an after-tax concept. By dividing by (1-taxrate), you make it gross of tax.