Income tax factors
Keep students focused on the big picture. Income tax laws are very detailed and the tax rates, useful lives, depreciation patterns and tax credits often change. However, the DCF approach for measuring the impact of income tax laws on cash flows does not change with changes in specific income tax rates, useful lives allowed, etc. (although, of course, the specific numbers in the analysis will be affected. Income tax laws area major means of implementing national fiscal policies. Changes are often aimed at encouraging or discouraging investments. During the s, the UK carried accelerated depreciation to the extreme. For qualified assets, it permitted 100% write-off of the original cost during the year of acquisition in some instances.
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