Asked by Andrea Diaz-Rodriguez on May 06, 2024
Verified
The present value of the capital cost allowance tax shield is deducted from the total of the net present values of all other cash flows to determine the final projected net cash flows of a planned depreciable asset acquisition.
Capital Cost Allowance
Refers to the depreciation expense that a company can claim for tax purposes on tangible and intangible assets over their useful life.
Tax Shield
The reduction in income taxes that results from taking allowable deductions from taxable income.
Depreciable Asset
A depreciable asset is a type of property that an organization can write off as an expense over time due to its potential to lose value, such as buildings, machinery, and equipment.
- Master the essential elements of capital budgeting and the multiple methods utilized in the appraisal of investment projects.
- Understand the principle of salvage value and its importance in the evaluation of capital budgeting.
- Comprehend the impact of taxation on cash flows resulting from capital investments.
Verified Answer
ZA
Zarylyk ArturMay 07, 2024
Final Answer :
False
Explanation :
The present value of the capital cost allowance tax shield is not deducted from the total of the net present values of all other cash flows; instead, it is typically added to the net present values of all other cash flows to determine the final projected net cash flows of a planned depreciable asset acquisition.
Learning Objectives
- Master the essential elements of capital budgeting and the multiple methods utilized in the appraisal of investment projects.
- Understand the principle of salvage value and its importance in the evaluation of capital budgeting.
- Comprehend the impact of taxation on cash flows resulting from capital investments.