© 2012 McGrawHill Ryerson Ltd.Chapter 9 -1  In Canada, taxable income is based on a deduction called Capital Cost Allowance (CCA): Taxable Income = Revenues.

Slides:



Advertisements
Similar presentations
Chapter 14 Capital Budgeting Decision Part B. Other Approaches to Capital Budgeting Decisions Other methods of making capital budgeting decisions include...
Advertisements

© Mcgraw-Hill Companies, 2008 Farm Management Chapter 17 Investment Analysis.
11-1 Copyright © 2004 by Nelson, a division of Thomson Canada Limited. Capital Investment Decisions 11 PowerPresentation® prepared by David J. McConomy,
1 of 24 ©2012 McGraw-Hill Ryerson Limited Learning Objectives 3.Outline the many factors to be considered in dividend policy. Calculate aftertax income.
Income Taxes in Capital Budgeting Decisions Chapter 15.
Capital Budgeting and Cost Analysis
©2002 Prentice Hall Business Publishing, Introduction to Management Accounting 12/e, Horngren/Sundem/Stratton Chapter 11 Capital Budgeting.
Copyright © 2003 Pearson Education Canada Inc. Slide Chapter 22 Capital Budgeting: A Closer Look.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Making Capital Investment Decisions Chapter Ten.
Engineering Economics in Canada Chapter 8 Taxes (Important Chapter)
Capital Budgeting – Final Analysis For Students, Term 1, 2002/03 02_Lecture11.ppt.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Making Capital Investment Decisions Chapter Ten.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Financial Statements, Taxes and Cash Flow Chapter Two.
Engineering Economic Analysis Canadian Edition Chapter 11: Income, Depreciation & Cash Flow.
©2012 McGraw-Hill Ryerson Limited 1 of 45 Learning Objectives 4.Appraise the use of the cost of capital as the discount rate in capital budgeting analysis.
Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 2000 Chapter Three Opportunity Cost of Capital and of Capital and Capital Budgeting.
FINANCIAL ACCOUNTING A USER PERSPECTIVE Hoskin Fizzell Davidson Second Canadian Edition.
Semih Yildirim ADMS Chapter 8 Using Discounted Cash Flow Analysis Chapter Outline  Discount Cash Flows, Not Profits  Discount Incremental.
Copyright © 2003 McGraw Hill Ryerson Limited prepared by: Carol Edwards BA, MBA, CFA Instructor, Finance British Columbia Institute of Technology.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Leasing Chapter Twenty-Two Prepared by Anne Inglis, Ryerson University.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA Copyright.
©2012 McGraw-Hill Ryerson Limited 1 of 45 Learning Objectives 4.Appraise the use of the cost of capital as the discount rate in capital budgeting analysis.
10-0 Capital Cost Allowance (CCA) CCA is depreciation for tax purposes The depreciation expense used for capital budgeting should be calculated according.
Chapter McGraw-Hill Ryerson © 2013 McGraw-Hill Ryerson Limited Making Capital Investment Decisions Prepared by Anne Inglis 10.
PRINCIPLES OF MANAGERIAL ACCOUNTING Chapter 15. After-tax issues After-tax Cost of a Cash Expense After-tax cost = (1- Tax rate) x Cash expense After-tax.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Leasing Chapter Twenty-Two Prepared by Anne Inglis, Ryerson University.
© 2012 McGraw-Hill Ryerson LimitedChapter  Operating Leases ◦ Need to compare the equivalent annual cost of buying the asset versus the annual lease.
© 2013 McGraw-Hill Ryerson Limited
DETERMINING CASH FLOWS FOR INVESTMENT ANALYSIS
Capital Budgeting Decisions
©2012 McGraw-Hill Ryerson Limited 1 of 45 Learning Objectives 1.Define capital budgeting decisions as long-run investment decisions. (LO1) 2.Explain that.
Depreciation Is depreciation a revenue or expense? What types of items get depreciated? –L–L Depreciation –A–A Why depreciate something?
1 Learning Objectives After studying the material in this chapter you will be able to do the following: LO1Define capital assets and recognize their different.
ACCT 2302 Fundamentals of Accounting II Spring 2011 Lecture 21 Professor Jeff Yu.
Capital Cost
Learning Objectives Understand the Business – LO1 Define, classify, and explain the nature of long-lived assets. Study the accounting methods – LO2 Apply.
22-0 Incremental Cash Flows 22.4 After-tax lease payment (outflow) Lease payment*(1 – T) Lost depreciation tax shield (outflow) Depreciation * tax rate.
CHAPTER TEN Capital Budgeting: Basic Framework J.D. Han.
Opportunity Cost of Capital and Capital Budgeting Chapter Three Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
© 2012 McGrawHill Ryerson Ltd.Chapter ..and Possible Solutions ◦ Sensitivity Analysis  Analysis of the effects of changes in sales, costs, etc.
Principals of Managerial Finance 9th Edition Chapter 3 Financial Statements, Taxes, Depreciation, and Cash Flow.
Financial Statements, Taxes and Cash Flow1 Financial Statements, Taxes and Cash Flows Financial Statements  Assets Building $190,000 Accumulated Depreciation.
XYZ Corp. Is considering investing in a project (shoe factory) that cost the company $300,000 today. This project can be depreciated using straight line.
MAKING INVESTMENT DECISIONS WITH THE NET PRESENT VALUE RULE
CHAPTER 12: STRATEGIC INVESTMENT DECISIONS Cost Management, Canadian Edition © John Wiley & Sons, 2009 Chapter 12: Strategic Investment Decisions Cost.
Managerial Accounting: An Introduction To Concepts, Methods, And Uses Chapter 9 Capital Expenditure Decisions Maher, Stickney and Weil.
AGEC 407 Investment Analysis Time value of money –$1 received today is worth more than $1 received in the future Why? –Earning potential –Risk –Inflation.
Engineering Economic Analysis Canadian Edition Chapter 11: Income, Depreciation & Cash Flow.
Income Tax Considerations Converting to after tax cash flows.
Income, Depreciation & Cash Flow Chapter 11 Mechanical Engineering 431 Engineering Economics.
Contemporary Engineering Economics, 4 th edition, © 2007 When Projects Require Only Operating and Investing Activities Lecture No. 39 Chapter 10 Contemporary.
Capital Budgeting. Typical Capital Budgeting Decisions Capital budgeting tends to fall into two broad categories...  Screening decisions. Does a proposed.
Some CCA Classes – Table 2.9
10-0 Making Capital Investment Decisions Chapter 10 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
10-0 Pro Forma Statements and Cash Flow 10.3 Capital budgeting relies heavily on pro forma accounting statements, particularly statements of comprehensive.
Prepared by Ingrid McLeod-Dick Schulich School of Business © 2015 McGraw–Hill Ryerson Limited All Rights Reserved Net Present Value and Capital Budgeting.
Chapter McGraw-Hill Ryerson © 2013 McGraw-Hill Ryerson Limited Making Capital Investment Decisions Prepared by Anne Inglis Edited by William Rentz 10.
Key Concepts and Skills
Income Taxes and the Net Present Value Method
Example: Replacement Problem continued
FINANCIAL ACCOUNTING A USER PERSPECTIVE
12 The Capital Budgeting Decision Prepared by: Michel Paquet
Project Cash Flow Analysis
Capital Cost Allowance (CCA)
Tax Shelter & Cash Flow Benefits: 5-Year 200% Declining Balance Depreciation for a $100 million “wind farm” Deduction from Otherwise Taxable Income Reduction.
Capital Budgeting Decisions
Lecture 5 NPV Calculation.
Time Value of Money & Cash Flow Estimation Prepared By Toran Lal Verma
Accounting Help for Assignment
Presentation transcript:

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -1  In Canada, taxable income is based on a deduction called Capital Cost Allowance (CCA): Taxable Income = Revenues - Expenses - CCA ◦ The terms depreciation and CCA are often used interchangeably  Capital Cost Allowance (CCA) ◦ The amount of write-off on depreciable assets allowed by Canada Revenue Agency against taxable income  Un-depreciated Capital Cost ◦ The balance remaining in an asset class that has not yet been depreciated in that year LO3

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -2  The tax savings arising from CCA is called the CCA tax shield ◦ For calculating CCA, assets are assigned to different asset classes. These classes have specified CCA rates  Sale of Assets  Termination of Asset Pool LO3

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -3  Intangible assets use a straight-line depreciation method for computing CCA  Most asset classes use a declining balance method for computing CCA. ◦ The tax shield generated by CCA generally has an infinite life. ◦ Projects typically have a finite life.  When computing NPV, we calculate the present value of the operating cash flow separately from the present value of the CCA tax shields LO3, LO4

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -4 where: C= capital cost of asset acquired today d= CCA rate for the specified asset class TC = firm’s tax rate r = discount rate S = salvage value from sale of asset at the end of Year t The PV of the CCA Tax Shield is equal to LO3, LO4

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -5 LO3, LO4

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -6  Operating Cash Flows excluding CCA tax shield: LO3

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -7  Total Cash Flows excluding CCA tax shield: 12% = $1,040 LO3

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -8  Present Value of the CCA tax shield : LO3

© 2012 McGrawHill Ryerson Ltd.Chapter 9 -9  Net present value = total PV excluding CCA tax shield + PV of CCA tax shield = $1,040 + $2,366 = $3,406 LO3

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.