Sanjeev ghai income tax ppt
-
Upload
ojas-kumar -
Category
Documents
-
view
215 -
download
0
description
Transcript of Sanjeev ghai income tax ppt
Chapter 11 - Income Taxes Click here for Streaming Audio To Accompany Presentation (optional)
EGR 403 Capital Allocation TheoryDr. Phillip R. Rosenkrantz
Industrial & Manufacturing Engineering Department
Cal Poly Pomona
EGR 403 - Cal Poly Pomona - SA14 2
EGR 403 - The Big Picture• Framework: Accounting & Breakeven Analysis• “Time-value of money” concepts - Ch. 3, 4• Analysis methods
– Ch. 5 - Present Worth– Ch. 6 - Annual Worth– Ch. 7,7A,8 - Rate of Return (incremental analysis)– Ch. 9 - Benefit Cost Ratio & other methods
• Refining the analysis– Ch. 10, 11 - Depreciation & Taxes– Ch. 12 - Replacement Analysis– Sanjeev Ghai Income Tax
EGR 403 - Cal Poly Pomona - SA14 3
Income Taxes
• Taxes have an impact on cash flow and affect the decisions management makes concerning investments.
• Integrating tax considerations into economic analysis requires a thorough understanding of two issues.– How the taxes are imposed.– How they affect the economic analysis techniques.
EGR 403 - Cal Poly Pomona - SA14 4
A Partner(s) in the Business
For simplification the text focuses on either Federal Income taxes or bundles the tax into a rate that reflects all taxing entities. This is done as the taxes at the state or local level vary widely in the manner in which they are administered.
Type of tax-Income tax based on earnings-Property tax based on property value-Sales tax based on purchase price-Use tax based on type of use of an item.
Collected by-Federal-State-County-City
EGR 403 - Cal Poly Pomona - SA14 5
General Process• Understand the tax laws affecting the project of
interest.• Estimate the cash flows without considering the
effect of taxes.• Adjust the cash flow based on the effects of
depreciation and income taxes.• Determine the after-tax measure of interest (PW,
IRR, payback, etc.).
EGR 403 - Cal Poly Pomona - SA14 6
Calculation of Taxable Income
• Tax laws can be very complex leading to very complex calculations.
• A tax is just another disbursement for services rendered.
EGR 403 - Cal Poly Pomona - SA14 7
Classification ofBusiness Expenditures
• Capital expenses.– Expenditures for depreciable assets.
• Generally those items having a life in excess of one year.
– Expenditures for non-depreciable assets.• Generally land, as land has no finite life.
• Operating expenses.– Materials, labor, overhead, rents, leases, equipment
having a life of less than one year.