Capital budgeting doubt

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

Thread Starter

Nivetharaman Raman

CA Inter

★ 10K+

21-Apr-20 14:27

Please elaborate the question properly

Sriram Somayajula

Admin

21-Apr-20 17:57

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

Thread Starter

Nivetharaman Raman

CA Inter

★ 10K+

21-Apr-20 20:14

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

Admin

21-Apr-20 20:16