I do not understand how does this work.

and What is DTS? Why does DTS count like that?

Example Suppose you buy a plant for $1M and you depreciate it straight-line (not CCA) over 8 years but it will keep earning a steady amount for ever. How much must its annual pre-tax income be if your discount rate is 10% and the tax rate is 30% ? i.e. solve for the EBIT that makes the NPV cross zero Components of the NPV: - CF0=$1M - DTS1..DTS8=30%$1M/8 years =$37,500pa This is an ordinary annuity so PV=$200,059.73 - Income in perpetuity, after tax =(130%) EBIT Then perpetuity has value PMT/R=7.0EBIT Now solve $1M+200059.73+7EBIT=0 and find we need >$114,277.18 EBIT for positive NPV