May 18, 2010 at 10:39 am
In this question the project is for 25 years and starts in 3 years’ tie; dep at 10%. In the solution dep was charged for the first 15 years and not thereafter. Is there any reason for ? I don’t want to just assue . Tanx!May 20, 2010 at 12:18 pm
Depreciation is charged for 10 years (not for 15).
The reason is that it is 10% straight line (note i). After 10 years at 10% p.a. the book value will be zero.April 1, 2015 at 2:49 am
Dear Mr Moffat,
When a question says that the revenues “is scheduled to commence in three years’time” and “in three year time”, is there a difference re the point of time to set the correct cash inflow for it? should the revenue will be in year 3 or year 4 of the project then?
HanhApril 1, 2015 at 2:24 pm
Time 1, time 2 etc are points in time. Time 1 is 1 year from now (so we discount for one year), time 2 is 2 years from now (so we discount for 2 years) and so on.
We always assume that operating flows (revenues and costs) occur at the ends of years unless told otherwise.
So if the revenue commences in 3 years time, it means that the first revenue will be in the 4th year (which starts in 3 years time) and we assume that the cash is received at the end of the year which is time 4.April 2, 2015 at 8:20 am
Dear Mr Moffat,
Please would you advice if there is a difference between stating “commences in 3 years time” & “in 3 years time”.
Because note (e) from the question provides with the information that the demolition cost of USD10 mil.would be in three years time, so I think it would be in time 4, but the answer is in the third year.
Thank you very much.
HanhApril 2, 2015 at 11:27 am
The demolition cost is not an operating flow. The questions says you receive 10M in 3 years and so it means we get it in exactly 3 years – i.e. time 3.
(We are discounting for whole years – time 1 is not a year, it is 1 year from now, and so on)April 3, 2015 at 2:03 am
Ah, it is not the operating cost item, I got it now :).
Thanks a lot Mr Moffat.April 4, 2015 at 6:26 am
You are welcomeApril 24, 2015 at 7:43 am
With regards to the building costs of 600 and 3,300…the tax saved on capital allowances…is from T? to T?…?
thanks…April 24, 2015 at 8:56 am
From time 4 to time 13 inclusive.
Because (a) it is straight line over 10 years (per note (i)); (b) there is no delay in the tax (per note (h)); and, generation starts in 3 years time, so the first income is in the 4th year (per note (a) and my previous explanations)
You must be logged in to reply to this topic.