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lecture10 - Taxable Income = Revenues Costs Depreciation...

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Lecture 2/06/08 1. Review of Capital Cost Terminology 2. Calculation of Taxes 3. Examples
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Capital Costs Terminology Devaluation expense - Amount an asset decreases in market value during service life. Depreciation expense - Decrease in value of an asset reported for income tax purposes. a. Straight line depreciation Depreciation per year = Total devaluation expense Service life
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Cash Flow After Taxes
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Unformatted text preview: Taxable Income = Revenues - Costs - Depreciation Tax = Tax Rate *(Revenues - Costs - Depreciation) Cash Flow (after taxes) = Revenues - Costs - Tax = Revenues - Costs -Tax Rate *(Revenues - Costs - Depreciation) Cash Flow=(Revenues-Costs)(1-Tax Rate) + Tax Rate*Depreciation Examples • See example sheet • Will be presented on white board and also in Excel....
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