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Kaplan Book page # 205 Puxty Plc
Why the rental charges are treated for 5 years in calculation of taxable cash flow while it is treated from 0 year in solution.
if we go conventional method then it should be treated from 0 year. i am confused about its double treatment.Which Kaplan book are you referring to?
I have looked at page 205 in both the Study Text and the Exam Kit, but I cannot find anything called Puxty 🙁
Well it’s strange, however it is chapter no. 7 International investment and financing decisions and TYU# 6
from kaplan study textOh dear – I am sorry!! It is on page 205 and I have found it – I am not sure why I missed it before 🙁
However……
The rent is payable in advance and so the actual rent cash flow is at time 0 (which is the start of the first year), time 1 (the start of the second year) and so on.
However, tax is calculated at the end of the year on the profits for the year, so despite the fact that the rent is payable at the start of the year, it will reduce the taxable profit for the year (which is calculated at the end of the year).
0, 1, 2 etc are not years – they are points in time. 0 is now. 1 is one year from now, 2 is 2 years from now and so on.
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Hey, referring to the same Question Puxty plc, the royalty is deducted before reaching the taxable profits of France. And the Royalty is given in k pound… So we will first convert it into Euro using exchange rate as :
20 * 1.5
And then we will inflate the royalty using inflation rate of France which is 6%. Is that the right treatment?
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