Before- and After-Tax MARRs
As we will see in Chapter 16, for-profit decision analysis should always account for the effects of income taxes. There are two ways to do this. One is to use a before-tax MARR on the before-tax cash-flow stream. This is really an approximation, but it will probably be accurate enough for most purposes. If more accuracy is needed, the other way is to use an after-tax MARR on the after-tax cash-flow stream. This section shows the relationship between the before- and after-tax MARR. Developing an after-tax cash-flow stream is explained in Chapter 16.
The organization needs to be clear that their MARR is stated in either before-tax or after-tax terms. If the organization has stated the MARR in before-tax terms, the after-tax ...
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