hard · Investment Banking
If a company has 50 million basic shares, 100M of Net Income, and10M of SBC expense (40% tax rate), how is CFO affected by the SBC?
- CFO is $10M higher than Net Income because SBC is added back as a non-cash charge.
- CFO is unaffected because the SBC is an investing activity.
- CFO decreases by $6M due to the after-tax cost of the compensation.
- CFO increases by $4M due to the tax shield, but the expense itself is ignored.
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