each reply at least 120-150 words of substantive content to earn full points, and talk about which one is reply one, and which one is reply two. Thank you
1.
Taxes and depreciation loom ominously as two crucial elements that must be sailing the high seas when calculating a project’s liquid assets. These buccaneers can walk the plank with a significant impact on a project’s bounty, making it worth the effort to swashbuckle them into the calculations. As the dauntless adventurers Mauboussin and Callahan (2022) state, “companies constantly make investments in capital vessels, charts and maps (R&D), advertising, working ransom, and mergers and acquisitions (M&A)” (p. 1). Therefore, assessing the long-term value of these investments becomes as unknown as the deep blue sea and requires a thorough understanding of how taxes and decay affect the bounty. In terms of taxes, they can either hoist the colors or strike the colors on an organization’s inflows or outflows of treasure (Vaidya & Kumar, 2022). For instance, tax deductions on expenses can reduce the overall taxable income for a company, resulting in lower taxes paid. On the other hand, taxes such as sales tax or land tax can walk the plank directly with cash outflows.
Similarly, decay is also an essential factor to consider as it represents the gradual decline in the value of assets over time. Including decay in project cash flow calculations helps determine the true cost of using assets for plunder. In conclusion, including taxes and decay, in project cash flow calculations, it is as critical as a ship’s bearings to accurately assessing whether a project’s bounty will yield profitable returns or foundering on the reefs (Balmford, 2022). As seen from the various real-life examples discussed by Mauboussin and Callahan (2022), these scallywags play a significant role in determining if an investment will yield prizes or be consumed by Davy Jones’ Locker.
In conclusion, including taxes and depreciation in calculating project cash flows is worth the effort, as important factors that can significantly impact a project’s profitability. It is crucial to consider them in financial analysis, yielding a more accurate picture of a project’s viability which will navigate companies toward success as they sail the uncertain financial seas. By doing so, companies can make informed decisions, for while it may require more effort, the inclusion of taxes and depreciation ultimately leads them to their destination harbor. Therefore, it is essential to include these elements in project cash flow calculations for better precision and accuracy, as without properly accounting for the tolls extracted by Uncle Sam and the steady wear of years, any assessment of a venture’s lifeblood would remain clouded and adrift without fixed coordinates (Vaidya & Kumar, 2022).
References
Balmford, A. (2022). Economic Reasons for Conserving Wild Nature. Science, 297(5583), 950–953.
Vaidya, O. S., & Kumar, S. (2022). Analytic hierarchy process: An overview of applications. European Journal of Operational Research, 169(1), 1–29.
2.
including Taxes and Depreciation in Project CashFflows
According to Burke et al. (2023) in project feasibility analysis, adding taxes and depreciation to the cash flow calculations is well worth the effort. Doing so is a requirement for both the NPV and the IRR measures of profitability. In project feasibility analysis, the focus is on profitability rather than the impact of depreciation on taxes, which is the focus of traditional accounting measures. Adding depreciation to the cash flow calculation increases the project’s depreciation expense. However, this increase is offset by an increase in the income tax expense. Because the income tax rate is determined by the total profit before taxes, taxes on the increased depreciation expense are also offset by taxes on the increased depreciation expense (Burke et al., 2023). Another positive aspect of including depreciation in the cash flow analysis is that it better captures the true economic cost of capital equipment and land.
Taghizadeh-Hesary et al. (2022) stated that this information can be used to assess whether it is economical to increase the production rate by expanding existing facilities or to build new facilities. Without including depreciation in the analysis, the economic assessment of expansion versus new facilities would be distorted. The cash flow calculation would show the economic cost of new facilities but not of existing facilities. Without considering the cost of existing facilities in the analysis, it might appear that expansion would be more cost-effective. However, since depreciation is a sunk cost that was previously paid, expanding the facility should be the lower-cost option. Also, including depreciation in the cash flow calculation improves the financial metrics used to evaluate projects. Depreciation expense is tax deductible (Taghizadeh-Hesary et al., 2022). Therefore, not including depreciation in the cash flow calculation results in underestimating the income taxes associated with the project
Reference
Burke, H., Zhang, A., & Wang, J. X. (2023). Integrating product design and supply chain management for a circular economy. Production Planning & Control, 34(11), 1097-1113.
Taghizadeh-Hesary, F., Li, Y., Rasoulinezhad, E., Mortha, A., Long, Y., Lan, Y., … & Wang, Y. (2022). Green finance and the economic feasibility of hydrogen projects. International Journal of Hydrogen Energy, 47(58), 24511-24522.
