Excel Finance Class 85: MACRS Depreciation & Asset Sale Impacts on NPV Cash Flows

Excel Finance Class 85: MACRS Depreciation & Asset Sale Impacts on NPV Cash Flows


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    4evastudent

    Again great video's. I had a question regarding the depreciation tax shield. It seems government has written to tax law to do away with it or at least put it on hold. Part of Obama's Emerging Program to incentivize businesses to invest; they are allowing businesses to write off full (100%) cost of capital investments. So when machines are purchased instead of expensing them for the next 3-20 years on their taxes businesses take the "up front" write off.

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    4evastudent

    They think it will put more dollars back in business owners hands now when they need it and less in years to come when they assume the economy will be stronger.
    If I have a correct understanding that would that not effect our OCF estimations on the proforma income statement?

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    ExcelIsFun

    There are some major differences between accrual accounting and cash flows. If the tax law really allows you to expense in year one then the cash flow analysis would refelct that, but the accured finacial statements would probaly show some depreciation each period to be in line with the Matching Principal.

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    Yolanda Torres

    This was very helpful to me and I actually passed my exam with 100%, I owe it to this tutorial, thank you so much!  You spoke in plain English!

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