技术经济学英文版演示文稿C课件

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1、技术经济学英文版演示文稿C最新课件4.CASH FLOW ANALYSIS 4.1 Basic Tax Structure 4.2 Domestic Agreements 4.3 International Contracts 4.4 Summary技术经济学英文版演示文稿C最新课件4.1 Basic Tax StructureIn this section,we discuss two important concepts which are common to most types of tax analysis.The only requirement is that the busin

2、ess invests in durable(lasting more than one year)goods.For an exclusively service industry requiring no investment in durable goods,the concept of depreciation may not be relevant.Otherwise understanding of depreciation and income taxes is almost a universal requirement for a proper economic evalua

3、tion of any project.技术经济学英文版演示文稿C最新课件4.1.1 DepreciationDepreciation in literal sense means a decrease in value.For example,you buy a car today,-In economic analysis,depreciation has a different meaning.Realizing that the existence of a corporation is perpetual,depreciation is treated as a replacemen

4、t cost.That is,if you buy a piece of equipment which has a useful life greater than one year,the assumption is that you will have to replace that piece of the equipment at the end of its useful life.Therefore,some money has to be set aside during the useful life so that the equipment can be replaced

5、.This yearly replacement cost is called depreciation.技术经济学英文版演示文稿C最新课件In other words,it is an allocation(分配分配)of the cost of the equipment spread over its useful life.The government allows the corporation to set aside this money for future replacement by not taxing this money.Although use of depreci

6、ation for durable equipment is the most common,it is also used for other properties.To generalize,a property can be depreciated if it satisfies the following characteristics:*It must be used in business or production of income.*It must have a life longer than one year.*It must be something that wear

7、s out(磨损磨损),decays(腐烂腐烂),becomes obsolete(陈旧陈旧)or loses value from natural causes.技术经济学英文版演示文稿C最新课件These characteristics are most appropriate for(适适于于)equipment;however,they can also be applied to building,patents and copyrights.Investment in such property is called a capitalized cost.In production

8、operations,this cost will include costs of casing(下套管、固井下套管、固井),piping,tank batteries,pumps,compressors,buildings,etc.Considering that these costs are incurred over tangible items,sometimes,these costs are also called tangible costs.Costs related to patents and copyrights are intangible costs;howeve

9、r,they still need to be capitalized.In contrast,the costs incurred for regular maintenance,upkeep and utilities for running the equipment,including the labor costs,are considered operating costs and can be deducted from the operating revenue in the same year for tax purposes.技术经济学英文版演示文稿C最新课件Althoug

10、h the distinction between the capitalized costs and the operating costs is clear in most instances,in some instances the distinction is difficult to achieve.In the context of petroleum industry,a good example would be the costs of drilling a well.These costs include:*Costs related to agreements with

11、 drilling contractors.*Surveys(调查调查)related to location of a well.*Road costs and dirt(污垢污垢)work related to well location.*Rig(钻机钻机)transportation and set up costs.*Fuel,water,drilling mud costs.*Labor costs including supervisors(主管人主管人),well site geologists(地质师地质师)and testing of well.*Stimulation（激

12、励）（激励）costs.*Cementing(水泥水泥)costs(does not include casing).*Surface damage（赔偿）（赔偿）costs.技术经济学英文版演示文稿C最新课件Since the drilling costs are incurred before the actual production begins,they cannot be considered operating costs.On the other hand,the costs for labor,utilities,drilling mud,and rig rental can

13、not be considered tangible costs.How to treat these costs is indeed a legislative decision.Different countries have different rules with respect to categorizing the costs of drilling.Before we understand different methods for calculating the depreciation,we need to understand some basic definitions.

14、技术经济学英文版演示文稿C最新课件Cost Basis-B0Cost basis represents the cost of acquiring(获得获得)a property.This is the total cost which will be capitalized over(从头到尾从头到尾)the property.This cost includes the cost of the property as well as all the other incidental expenses(杂费杂费)such as installation,freight(运费运费),and s

15、ite preparation.技术经济学英文版演示文稿C最新课件Book Value(Bk)Book value is cumulative depreciation subtracted from the cost basis of the property.In year k,the book value can be defined as,(4.1)where Dj is the depreciation in year j.The amount depreciated in each year will depend upon the method used.kjjkDB1basis

16、cost技术经济学英文版演示文稿C最新课件Salvage ValueSalvage value is the price obtained from the sale of property at the end of its useful life.Repair CostsRepair costs are costs related to keeping the property in an ordinary efficient operating condition.技术经济学英文版演示文稿C最新课件Capitalized CostsCapitalized costs related to

17、 the existing(现有的现有的)property are costs related to alterations(改造改造),additions or improvements that increase propertys useful life or value or make it adaptable(适应适应)for a different use.The distinction between repair costs and capitalized costs for an existing property is useful because repair costs

18、 can be deducted as operating costs,whereas,capitalized costs will have to be depreciated.This difference can have significant(重要的重要的)tax consequences as we will examine in the next section.技术经济学英文版演示文稿C最新课件Useful LifeThe time over which property is kept in productive use in a business.Tax Life The

19、period of time over which depreciation is calculated to offset(抵消、冲销抵消、冲销)taxable income.This period is usually shorter than the useful life of the property.It is determined by the tax code of a particular country depending on the type of property.For example,in the United States the tax life can be

20、 as short as 3 years for taxies and race horses,and as long as 31.5 years for non-residential（住宅）（住宅）real property.技术经济学英文版演示文稿C最新课件Example 4.1 An oil company ordered a new submersible pump for improving production from an old well.The cost of the pump is$20,000.The company will have to pay 7%sales

21、tax on the pump.In addition,shipping costs are$300,and the installation costs are$l,000.What is the cost basis for the pump?SolutionIn calculating the cost basis,any cost associated with purchase,shipping,installation and site preparation will have to be included.Therefore,the cost basis for the pum

22、p is,Cost of Pump$20,000 Sales Tax(7%)1,400Shipping Cost(运费)300Installation cost1,000Cost Basis$22,700 技术经济学英文版演示文稿C最新课件In calculating cost basis,it is critical that all the costs including some non-monetary transactions(交易交易)are included.One such example of non-monetary transaction would be trade-i

23、n(打折打折)benefit.If you trade in(抵价购物抵价购物)an oil pump for a new pump so that the cost of the new pump is$18,000,the cost will not be reduced by$2,000.Since the trade in value is considered to be$2,000,it will be added in the cost basis as a separate item.技术经济学英文版演示文稿C最新课件Straight Line Depreciation-SLD

24、Straight line depreciation is one of the easiest methods of estimating the depreciation.Mathematically,the depreciation is calculated as.(4.2)where Dk is the depreciation in year k,B0 is the cost basis,S is the salvage value at the end of tax life and n is the number of years of tax life.SBnDk01技术经济

25、学英文版演示文稿C最新课件Alternately,depreciation can also be calculated as,(4.3)where Bk-1 is the book value at the end of period k-l.Both equations would give the same result.The book value is calculated using Eq.4.l.A common term,S,in both Eq.4.2 and Eq.4.3 is difficult to estimate at the beginning of taxabl

26、e life for many properties.Many tax codes simplify the calculations by assuming that the salvage value is zero at the end of tax life.11knSBDkk技术经济学英文版演示文稿C最新课件Example 4.2 Consider a piece of equipment purchased for$5,000.If the tax life is five years,and the salvage value is zero,calculate the depr

27、eciation schedule over the five year period.YearDepreciationBook Value at the Beginning of the Year11,0005,00021,0004,00031,0003,00041,0002,00051,0001,000技术经济学英文版演示文稿C最新课件Declining Balance Depreciation-DBD The amount of depreciation in each year is a certain percentage of the book value at the end o

28、f previous year.This percentage is constant throughout the tax life of the property.This percentage is usually defined as the ratio of declining balance rate to the tax life.For example,if declining balance rate is 200%and the tax life of a property is 5 years,then the percentage of the book value u

29、sed as depreciation is 200%/5=40%per year.技术经济学英文版演示文稿C最新课件If we denote this percentage change in fraction as R,we can calculate the depreciation in year k as,(4.4)where the book value at the end of year k can be calculated as.(4.5)Substituting Eq.4.5 in Eq.4.4,we can calculate the depreciation in y

30、ear k as,(4.6)where B0 is the cost basis.The declining balance rate can vary between 100%to 200%(double declining balance);the most common value being 200%.1kkRBD101011kkjkkRBDBB101kkRRBD技术经济学英文版演示文稿C最新课件Example 4.3 Using the same information as in Example 4.2 and using the double declining balance

31、method estimate the depreciation schedule.SolutionFor year one.depreciation is calculated as(using Eq.4.6),D1=RB0where R is 200%/5=40%,and B0=$5,000.Substituting,D1=0.45,000=$2,000The book value at the end of year l can be calculated using Eq.4.5,B1=B0(1-R)1=5,000(1-0.4)=$3,000Similarly,for year two

32、,D2=RB0(1-R)2-1=0.4*5,000(1-0.4)=$l,200Or,using Eq.4.4,.D2=RBk-1=0.4(3,000)=$1,200The book value is,B2=(5,000)(1-0.4)2=$l,800Calculations can be repeated for other years as well,as shown in the table below:技术经济学英文版演示文稿C最新课件After five years,the total amount of depreciation allowed is$4,61l which is n

33、ot equal to the cost of the equipment.This is one of the major disadvantage declining balance method.That is,the cost of the equipment cannot be recovered fully over the tax life.Only at very large times can the total cost be fully recovered.YearBook ValueDepreciation15,0002,00023,0001,20031,8007204

34、1,0804325648259Total$4,611技术经济学英文版演示文稿C最新课件Sum of Years Digits Depreciation-SYDDThis method also results in a larger depreciation at the beginning of a useful life than the straight line depreciation method.It is not a very common method used for depreciation.To calculate the depreciation using this

35、 method,we first need to know the sum of years digits.This sum represents the sum of all the years in a tax life.For example,if n is the tax life of a property,sum is calculated as,sum=l+2+3+.+n (4.7)Alternately,we can also calculate the sum as,(4.8)2)1(sumnn技术经济学英文版演示文稿C最新课件Depreciation in year k c

36、an be calculated as,(4.9)We can write Eq.4.9 as,(4.10)Book value can be calculated using Eq.4.1.SBkDk0sumperiodofbeginningtheatlifetaxremainingSBnnknSBnnknDk00)1()1(22)1(1技术经济学英文版演示文稿C最新课件Example 4.4 Using the same information as in Example 4.2,calculate the depreciation schedule using the sum of ye

37、ars digits depletion.SolutionUsing Eq.4.10,depreciation in year 1 can be calculated as,For year two,The book value after year two is.667,1$)000,5()6)(5()115(21D333,1$)000,5()6)(5()125(22D000,2$)333,1667,1(000,52102kkDBB技术经济学英文版演示文稿C最新课件Similar calculations can be done for other years.Unlike declinin

38、g balance method,sum of years digits method allows the depreciation of the entire cost of an asset.YearDkBook Value11,6673,33321,3332,00031,0001,000466733353330Total Depreciation$5,000技术经济学英文版演示文稿C最新课件Unit of Production DepreciationThis method of estimating the depreciation is based on the number of

39、 units produced by an equipment rather than the life of the equipment.It is assumed that the total number of units that can be produced from the equipment is known.The amount of depreciation using this method can be calculated as,(4.1l)where(u)is the number of units produced in a given year,(U)is th

40、e total number of units that can be produced from the unit,(C)is the cost of the equipment,and(S)is the salvage value.)(ondepreciatiSCUu技术经济学英文版演示文稿C最新课件Declining Balance and Straight line DepreciationTo remove the major disadvantage of the declining balance method,i.e.,not being able to recover the

41、 entire cost of an asset;at the same time,to allow for the rapid depreciation as calculated by the declining balance method,a combination of declining balance and a straight line method is used.This method allows the calculation of depreciation using both the declining balance and the straight line

42、methods and switching from one method to another when method predicts a higher depreciation than the other method.技术经济学英文版演示文稿C最新课件Recall that straight line depreciation can be calculated as,(4.3)and the declining balance depreciation is calculated as,(4.4)For each year,we compute the depreciation u

43、sing both methods and choose the value which is higher.That is.if,(4.12),we select the declining balance methodif,(4.13),we select the straight line methodIf we assume that the salvage value is zero,we can simplify Eq.4.13 to write,1D1knSBkk1kDkRB1RB11-kknSBk1RB11-kknSBk技术经济学英文版演示文稿C最新课件Eq.4.14 prov

44、ides a condition for switching to a straight line method.For example,if n=5,and R=0.4,k 3.5 to switch to a straight line method.That is,we will switch in year 4 to a straight line method.The following example illustrates the technique.R1-1nkor11Rkn技术经济学英文版演示文稿C最新课件Example 4.6 Using the same informat

45、ion as in Example 4.2,calculate the depreciation schedule using the combination(double declining and straight line)method.Assume double declining balance(DDB).YearDepreciation(Declining balance)Depreciation(Straight Line)Book ValueAt The EndSelectedDepreciation12,0001,0003,0002,00021,2007501,8001,20

46、037206001,080720443254054054052165400540技术经济学英文版演示文稿C最新课件Declining Class Account DepreciationFor equipment which is assembled from various components,it is difficult to depreciate individual components separately.An example would be a pipeline network or a gas processing plant.It is difficult to kee

47、p track of a valve or a flange or a tee in a pipeline network;and depreciate it individually.To minimize this,accounting complexity another method commonly used for depreciation is the declining class account(DCA)depreciation.技术经济学英文版演示文稿C最新课件This method is based on whole investment perpetual declin

48、ing class account(DCA)schedule.The method is relatively easy to use.Assuming that the average tax life of the equipment is known,the depreciable amount in a given year is calculated as,(4.15)where Bk-l is the book value at the end of previous year and Ak is the sum of capital expenditures during yea

49、r k.Depreciation in year k is then calculated as,(4.16)where R is the declining balance ratio.This equation is continued to be used so long as the equipment is used for a given purpose.If any part of the capital equipment is disposed（处理、处置）（处理、处置）,the income received is treated as a taxable income.k

50、kkABDA1kkDARD技术经济学英文版演示文稿C最新课件4.l.2 Income Taxes In general terms,tax is a way by which authorities share part of the income of an individual or a corporation.These authorities may be federal government,individual states,local municipalities,counties and school districts.Taxing the income can take s

51、everal forms;the most common being income tax which is levied on the difference between the gross revenue and allowed deductions for tax purposes.技术经济学英文版演示文稿C最新课件Other types of taxes include property taxes which are based on the value of real estate:sales taxes which are based on the price of goods

52、;luxury taxes which are based on items which are not considered necessities;entertainment(招待招待)taxes which are based on entertainment expenses;and value added taxes which are based on the difference in a value of a good as it passes from one party to another.There may be other types which we have no

53、t included here.技术经济学英文版演示文稿C最新课件In this section,we will concentrate on income taxes.Income taxes in most instances are levied by either federal or central government and the local or state government.The laws governing the calculations of income tax are extremely complex and replete with exceptions

54、.Therefore,rather than considering the details of the tax laws in various countries,we will only concentrate on basic principles of tax laws which are common in most instances.技术经济学英文版演示文稿C最新课件The first principle about the income tax is that it is assessed based on the taxable income.Taxable income

55、is the difference between the gross income or gross revenue and allowed deductions by the tax law.Logical tax deductions are the operating costs or other expenses associated with operating a business.Other tax deductions typically included are depreciation,and interest payments.技术经济学英文版演示文稿C最新课件The

56、second principle common to most of the income tax laws is that the rates at which the tax applied tends to be progressive.That is,the tax rates are the smallest when the taxable income is the least.As the taxable income increases,the tax rate also increases.For example,in the United States,the tax r

57、ate is 15%for a corporation with a taxable income less than$50,000;however,the rate increases to 39%for taxable income exceeding$200,000.技术经济学英文版演示文稿C最新课件In most economic evaluations,one needs to use marginal rate for calculations.Marginal tax rate represents the tax rate applied to the last dollar

58、earned in the taxable income.For example,if the corporation has earned$30,000 last year and expects to add another$10,000 in taxable income with a new project,it is reasonable to assume a marginal tax rate of 15%;however,if the corporation earned$l,000,000 last year and is considering a new project

59、with a potential additional taxable income of$500,000,it is better to use 39%as a marginal tax rate in economic analysis.Because,that is the income tax rate that will be applied to any additional taxable income.技术经济学英文版演示文稿C最新课件Tax ComputationsTaxable income is calculated by subtracting the allowabl

60、e deductions from gross revenue.In mathematical terms,taxable income=gross revenue tax deduction (4.17)Most common deductions include operating costs,depreciation,overhead costs and other related expenses.Therefore,we can write,taxable income=gross revenue-operating costs -related expenses-depreciat

61、ion (4.18)技术经济学英文版演示文稿C最新课件Once the taxable income is calculated,the income tax is calculated by using the applicable marginal tax rate.That is,income tax=taxable income tax rate （4.19）To calculate net revenue,we need to subtract the actual expenses from the gross revenue.These expenses do not inclu

62、de depreciation or other deductions which are only deducted for tax purposes.Net revenue is calculated as,net revenue=gross revenue-operating costs -related expenses-tax (4.20)技术经济学英文版演示文稿C最新课件If we use the following notation:Aj=gross revenue in year jOj=operating costs in year j Dj=depreciation in

63、year j T=marginal tax rate Ej=other related expenses year jwe can write taxable income as,=Aj-Oj-Ej-Dj (4.21)we can write the income tax as,=T(Aj Oj-Ej-Dj)(4.22)and we can write the equation for net revenue as,=Aj-Oj-Ej-T(Aj Oj-Ej-Dj)net revenue=(l-T)(Aj-Oj-Ej)+TDj (4.23)Eq.4.23 can be repeated for

64、all the years in which a project is in operation.技术经济学英文版演示文稿C最新课件Example 4.8 A company wishes to buy a workstation computer for$15,000.With the use of this machine,the company can save$5,000 in outside computing costs.The maintenance agreement calls for a payment of$800 per year for the machine.Ass

65、ume that the useful life of the machine is five years.Assume further that a straight line depreciation is allowed over a five year period.If the income tax rate is 28%,calculate the NPV of this investment for the MROR of 15%.技术经济学英文版演示文稿C最新课件SolutionSample calculation for year one,gross revenue(savi

66、ngs)=5,000Using Eq.4.18,taxable income=gross revenue-operating costs-depreciation =5,000-800-3,000=$l,200Using Eq.4.19 tax=taxable incometax rate=l,2000.28=$336Using Eq.4.20,net revenue=gross revenue-operating costs-taxes =5,000-800-336=$3,864 技术经济学英文版演示文稿C最新课件In these calculations,we assumed a straight line depreciation.Therefore,The following table lists the calculations for other years.yearper000,3$5000,15on depreciati技术经济学英文版演示文稿C最新课件YearGrossIncomeTaxableIncomeTaxNetRevenue0-15,000 -15,0001