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Risk analysis in capital budgeting

If the cash flows are before tax,we need to add back the depreciation right? But why didn't add that back? And also why they add working capital at end of the life of project as cash inflow?

Screenshot_2022-08-06-16-43-00-67_c37d74246d9c81aa0bb824b57eaf7062.jpg

Kanishga M

Kanishga M

CA Inter

0

1 day ago

30

Answers (6)

Cash flow before tax - 24,00,000 Less - depreciation (12,00,000) EBT - 12,00,000 Tax - (3,60,000) EAT - 8,40,000 + Depri- 12,00,000 Cash flow - 20,40,000 Answer remains same but method is changed And at the end of project working capital is received that is 12,00,000 Some examples is like cash stock etc.


Divy Degda

Divy Degda

CA Inter

750

1 day ago

Ya


Divy Degda

Divy Degda

CA Inter

750

1 day ago

Divy Degda

Ya

But we will sell every year so why we consider it only in year end?


Thread Starter

Kanishga M

Kanishga M

CA Inter

0

23 hrs ago

We only sell ? We do purchase so just remember working capital realised at the end of project


Divy Degda

Divy Degda

CA Inter

750

22 hrs ago

Divy Degda

We only sell ? We do purchase so just remember working capital realised at the end of project

Ok,now clear, thank you so much


Thread Starter

Kanishga M

Kanishga M

CA Inter

0

22 hrs ago

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