Investment Appraisal and Tax — OpenTuition Forums

MIMuhammad Irfan6y ago

Hi, Need to ask that in an investment appraisal questions, usually we have positive operating cash flows before tax but if for some reason we have one or two negative cash flows before tax, then do we have a tax charge or tax claim?? Thanks

John MoffatTutor6y ago#1

A negative operating cash flows results in a tax inflow. (It is because we always assume that the company is already making profits elsewhere and is therefore already paying tax. Therefore a 'loss' from our new project simply reduced the existing profit of the company and therefore saves tax.)

MIMuhammad Irfan6y ago#2

Thanks!!

John MoffatTutor6y ago#3

You are welcome :-)

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