August 2004
Intermediate to advanced
656 pages
15h 28m
English
Content preview from Return on Software: Maximizing the Return on Your Software Investment
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Comparing Financing Methods in After-Tax Cash-Flow Terms
When a company wants to buy an asset, there are three ways of paying for it, as follows:
Buy it with money they already have (use retained earnings).
Buy it using a loan.
Lease it.
Each of these options has different income tax consequences, which are compared using the example in Table 17.9.
| Initial investment | $40,000 |
| Salvage value | None |
| Annual income | Not shown |
| Annual operating costs | $8000 |
| Depreciation method | Straight-line, 4 years, half-year convention |
| Planning horizon | 6 years |
| Effective tax rate | 48% |
| MARR (after-tax) | 10% |
The income cash-flow stream doesn't need to be included because each option will produce the exact same income; ...
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