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CCTF = factor used to obtain aftertax cost or benefit of asset
Taking tax savings from depreciation into account
(real aftertax cost of asset)
CCTF obviates need to use more involved tax tables.
1
CCTF estimated using two expressions
( )( )



.

\

+ +
+
÷ =
i d i
i
td CCTF
new
1
)
2
1 (
1
CCTF new Post  81
t = tax rate
d = CCA rate
i = after tax interest rate
Assumes tax benefits earned forever
(no terminal data on deductions)
2
CCTF estimated using two expressions
CCTF Old Pre  81
t = tax rate
d = CCA rate
i = after tax interest rate (if before use rule of thumb)
( ) d i
td
CCTF
old
+
÷ =1
assumes tax benefits terminated when asset
is salvaged.
3
Consider P = $25000 (vehicle)
t = 43%
d = 30% Capital Cost Allowance (CCA) rate for DB
MARR = 12% After taxes (to obtain from before tax rate use
rule of thumb)
What is tax adjusted true price of vehicle?
CCTF (new) = 0.70931
Adj. Price = 0.7093 (25000) = $17,733
true aftertax cost of vehicle.
4
Example: CCTF
Rules for applying CCTF:
First cost of asset  multiply by CCTF new then PW
Savings over time  multiply by (1t) then PW
Salvage value of asset  multiply by CCTF old then PW
In applying above rules, no need to use Detailed Tax Tables. If
If depreciation is by DB method and depreciation only deduction.
5
Example CCTF rule application
Asset = $10000
Savings = $4000/yr for N=5
Salvage value = $2000 at N=5
Tax rate = t = 50%
MARR = 12% after taxes.
t = 20%
In class.
6
81 Assumes tax benefits earned forever (no terminal data on deductions) CCTFnew i (1 ) 1 td 2 i d 1 i t = tax rate d = CCA rate i = after tax interest rate 2 .CCTF estimated using two expressions CCTF new Post .
81 assumes tax benefits terminated when asset is salvaged. CCTFold td 1 i d t = tax rate d = CCA rate i = after tax interest rate (if before use rule of thumb) 3 .CCTF estimated using two expressions CCTF Old Pre .
70931 = 0. 4 .7093 (25000) = $17.733 true aftertax cost of vehicle. Price = 0.Example: CCTF Consider P = $25000 (vehicle) t = 43% d = 30% Capital Cost Allowance (CCA) rate for DB MARR = 12% After taxes (to obtain from before tax rate use rule of thumb) What is tax adjusted true price of vehicle? CCTF (new) Adj.
multiply by (1t) then PW Salvage value of asset . If If depreciation is by DB method and depreciation only deduction. 5 .multiply by CCTF new then PW .multiply by CCTF old then PW In applying above rules. no need to use Detailed Tax Tables.Rules for applying CCTF: First cost of asset Savings over time .
Example CCTF rule application Asset = $10000 Savings = $4000/yr for N=5 Salvage value = $2000 at N=5 Tax rate = t = 50% MARR = 12% after taxes. t = 20% In class. 6 .
.909 ##...19079.08 9 3.0.7.9 %.7147 $..:0 .88 .