Subject: FINANCIAL MANAGEMENT

CAPITAL BUDGETING

On an income statement, cash expenses and depreciation expenses are added together and deducted from revenues to determine net income.

Assume that a company has cash operating expenses of P500,000 and depreciation expenses of P200,000. Can these amounts be added together and treated as one in a capital budgeting analysis, or should they be kept separate? Why? Assume a tax rate of 30%.