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Engineering Economy, 5/e

Leland Blank, Texas A&M University
Anthony Tarquin, University of Texas - El Paso

After-Tax Economic Analysis

Learning Objectives

Purpose: Perform an economic evaluation of one or more alternatives considering the effect of U.S. income taxes and other pertinent tax regulations.

This chapter will help you:

1. Terminology and rates

Correctly use the basic terminology and income tax rates for corporate (and individual) taxpayers.

2. CFBT and CFAT

Calculate before-tax and after-tax cash flow.

3. Taxes and depreciation

Demonstrate the tax advantage of accelerated depreciation and a shortened recovery period.

4. Depreciation recapture and capital gains

Compute the tax impact of depreciation recapture and capital gains (losses).

5. After-tax analysis

Evaluate alternatives using after-tax PW, AW, and ROR analysis.

6. Spreadsheets

Develop spreadsheets that structure after-tax evaluation of two or more alternatives.

7. After-tax replacement

Evaluate a defender and challenger in an after-tax replacement study.

8. Value added analysis

Evaluate alternatives using after-tax economic value-added analysis.

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