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Capital budgeting doubt
Sir ,cash expenses (1-t) and dep *t ...why ?
Answers (4)
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)
