CMA Part 2 - E - Capital Budgeting - Kell
Вставка
- Опубліковано 29 жов 2024
- Brian Hock works through a set of 3 multiple choice questions about Kell Inc. covering CMA Part 2 - Section E - Capital Budgeting.
Learn more about HOCK international's comprehensive CMA exam prep at: www.hockinterna...
Hello, in the first question they were asking about cash outflow then why do we need to consider inflows and giving net outflows? please clarify this point. Thank you
Dear Friends, I have confused between company valuation and capital budgeting use DCF method:
1/ With company valuation by DCF method, I use Free Cash Flow and discount rate (ex: WACC) evaluate?.
2/ With Capital Budgeting by DCF method, I use Operating Cash Flow and discount rate (ex: WACC) evaluate?.
Though the two methods are very similar, they are different in the scope of what they are calculating. When doing it for a business you use the free cash flows that the business generates each year. When doing capital budgeting you use all of the cash flows that the company will generate and incur through the life of the project. I am not sure that I would use the term operating cash flows when using capital budgeting.
Dear Friends, I think each capital budgeting have own capital structure. Now, with 10 capital budgeting, I want to make the summary report of Capital structure. Could you share?. Thank you.
I do not understand your question. Can you please ask it in a different way?
Hi Brian,
I am a bit confused in the second question answer, the Indirect cost and Depreciation expense have the same amount of $500,000. why their numbers after tax is different 300,000 and 200,000?
Hello. Amr Kabsha,
The difference is because they are different types of expenses.
For depreciation, the company has $500,000 of depreciation expense, but there is no cash outflow to pay for depreciation. This will reduce their taxable income by $500,000 and since the tax rate is 40%, they will save $200,000 in taxes. This $200,000 tax savings as a result of depreciation is treated as a cash inflow. There is no cash outflow associated with the depreciation expense since it is a noncash event.
The $500,000 of indirect costs are an expense, but they are also a $500,000 cash outflow. So, the $500,000 outflow is also an expense and reduces taxable income as well. So, the $200,000 tax savings connected to the indirect cost is net together with the $500,000 outflow for the indirect expenses.
So, the difference is that the indirect costs have a cash outflow, but the depreciation expense does not have a cash outflow connected to it.
Does this help?
Brian
@@brianhock720 That was helpful, Thank you! I am planning to go for the CMA in 2020 and I will consider the review package offered by your company.
@@amrkabsha9558, that would be a great goal for you for 2020 - to pass the exams. If you are interested we have a new CMA Course that starts in January in which I will be leading the group through the study process to pass the exams in June. We will be starting in the middle of January and the 16-week course will have 2 hours a week live online with me. One hour will be guided studying during which I will do some teaching, some guiding and some motivating. In addition, there will be one hour a week that I will be available online to answer any questions that you have. This program will provide all of the needed structure and teaching and support to pass your exam with confidence in June. You can find out more about it here: www.hockinternational.com/shop/cma-with-brian/
No matter how you study, I wish you success in your CMA studies in 2020.
Brian
very good this explain mothed
HI
Sir 1,500,000 *40/100=$6,00,000/- Sir ????
please ans Sir?
Where is this calculation in the Video?
Might be very late for this but I will give you an easier way to think about it
Take the income statement side first:
+ Revenue 8,000,000
- Cost 6,500,000
- Indirect Cost 500,000
- Depreciation 300,000
= Earning before Tax 700,000
= Income after tax 500,000 (700,000/1.4)
Now move to the statement of cash flow
+ Net Income 500,000
+ Depreciation 300,000
= Net Cash from Operation activities 800,000
where can i find full package of MCQs for CMA part two please anyone helps me please ?
FTC global