Question: Hershey''s current task involves explaining the valuation model and outcome to the clients of the Bank of AOB. Today, one of the clients asks Hershey

Hershey''s current task involves explaining the valuation model and outcome to the clients of the Bank of AOB. Today, one of the clients asks Hershey to explain the reason that after-tax interest expense is added back to net income when calculating the free cash flow to the firm (FCFF). He explains that the after-tax interest expenses have been included in both the estimations of the investment of non-cash working capital and the investment of capital expenditure. Therefore, Hershey suggests we add back the after-tax interest expenses to prevent double-counting/subtracting it twice.

Q. Is HER suggestion on the reason that we add back after-tax interest expense justifiable? Why?

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