Supplement_CapitalBudgetingAndTaxes

This effect is called the depreciation tax shield the

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Unformatted text preview: es. This effect is called the depreciation tax shield. The tax effect of depreciation is discussed at the end of this supplement. 6A:002 – Berg Taxes and Capital Budgeting Page 2 Periodic Future Cash Inflows Most periodic future cash inflows from capital budgeting projects are items that appear on the income statement. For example, additional sales revenue, changes in product costs, and changes in operating expenses all appear on the income statement. This means that the periodic future cash inflows will result in additional taxes due. These taxes decrease the benefits that the firm gets from the capital budgeting project, so they must be incorporated in the project analysis. For this class, we will assume that all future cash inflows are the types of cash flows that appear on the income stateme...
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This note was uploaded on 09/29/2011 for the course 06A 002 taught by Professor Stuff during the Spring '11 term at University of Iowa.

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