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Capital budgeting doubt

Sir ,cash expenses (1-t) and dep *t ...why ?


Nivetharaman Raman

Nivetharaman Raman

CA Inter

11K+

21-Apr-20

116

Answers (4)

continue .... question above If not ignore tax....


Thread Starter

Nivetharaman Raman

Nivetharaman Raman

CA Inter

11K+

21-Apr-20

Please elaborate the question properly


Sriram Somayajula

Sriram Somayajula

Admin

21-Apr-20

In cash expenses 1-tax Dep multiple by tax why do like this


Thread Starter

Nivetharaman Raman

Nivetharaman Raman

CA Inter

11K+

21-Apr-20

Cash flow is Pre tax so we remove tax and compute cash flow net off tax. Depreciation is a non cash item there is no cash outflow but there is a tax benefit because it is a deductible expense. Because of depreciation we get a tax benefit Hence we add back the following amount ( depreciation x tax rate)


Sriram Somayajula

Sriram Somayajula

Admin

21-Apr-20

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