Filetype Power Point PPTX | Posted on 01 Sep 2022 | 4 years ago
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295x Filetype PPTX File size 0.14 MB Source: ahmadprayudi.blog.uma.ac.id
Learning Objective 1
Compute the after-tax
net
present values of
projects.
Income Taxes and
Capital Budgeting
What is an example of another type of
cash flow that must be considered
when making capital-budgeting decisions?
Income taxes
Marginal Income Tax Rate
• In capital budgeting, the relevant tax rate
is the marginal income tax rate.
• This is the tax rate paid on additional
amounts of pretax income.
Effects of
Depreciation Deductions
• For tax purposes, accelerated depreciation
is generally allowed.
• The focus is on the tax reporting rules, not
those for public financial reporting.
• The number of years over which an asset
is depreciated for tax purposes is called
the recovery period.
Depreciation Deductions for
Capital Budgeting
• Depreciating a fixed asset creates future
tax deductions.
• The present value of this deduction
depends directly on its specific yearly
effects on future income tax payments.
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