How to Calculate NPV with Taxes

[@GururajSapkal]

This was the exact type of problem I was searching for!!

[@afihaileywibowo1095]

Very clear explanation, thank you.

[@milenamilojevic3324]

Dude, you saved my presentation. Thank you!!

[@Edspira]

Glad to hear it!

[@waleedbaig1205]

Appreciate your effort. that's what i was looking forrrr.. Thank you Sir

[@dexoda4559]

Many thanks dude

[@Johnny.bar99]

I'M OUTSIDE THE EXAM ROOM, HALP

[@ronniegaming1740]

Ohh did you passed?

[@Johnny.bar99]

​@Ronnie nope lol. I took it a semester and 600$ later lol.

[@angelali6330]

Hi Edspira, in some questions, they do deduct the taxes in year 0, why is that the case when we don't deduct it in year 0 here?

[@janicehu5823]

thanks, it helps a lot

[@brendanpeake4302]

just in time for finals :D

[@HalifaxHercules]

Is there a Canadian version of this tutorial, especially with the 1/2 year rule for assets used prior to 2019 and accelerated rule between 2019 and 2028? In Canada, if you used an asset prior to 2019, you have to use the 1/2 year rule, meaning that the 1st year depreciation rate is 10.5%. For most assets used between 2019 and 2024, you use the accelerated rule for year one at 1.5 times the depreciation rate, which is 31.5%.

[@abdullahiramat2145]

How do we get the 79%? Thank 😊

[@ABishop681]

Tax rate was 21%

[@dpt13]

It is 1-21% = 79%

[@brettwood4174]

i thought depreciation wasnt included when calculating npv

[@yashbhalla25]

But tax saved from it will be included

[@vijithsoman]

What if there is interest payment too?

[@kieranjones9507]

did you workout how to do it? I'm in the same boat

[@vijithsoman]

@@kieranjones9507 Not yet.

[@bkwebb2]

@@vijithsoman Interest expense is just another cash outflow. Assume you had $1,000 annual interest. You would subtract that from your $20,000 inflow each year and then multiply by the 79% to get the after tax impact. Then continue to discount. If everything else in this example stayed the same your NPV would go down due to this additional outflow (expense). Hope that helps.

[@HalifaxHercules]

Interest would be included as part of calculating the "Required Rate of Return" or "Weighted Average Cost of Capital". For debt financing, you use the After Tax Cost of New Debt when calculating your Weighted Average Cost of Capital.

[@TopCornerFacts]

you're an angel ahaha