Q Fuelit(12/00)

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May 25, 2014 at 10:16 am #170614
hasanali95
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In the answer,in the NPV calculation
The cash flows have been divided into 2 columns
One is for yrs4-13
The other is for yrs14-28(the last 15 yrs)Which contains the same cash flow as calculated for the 10 yr period
But the expected life is till yr28.Why is it so that the cash flows are divided as such?
Thanks in advance
May 25, 2014 at 10:52 am #170628
John Moffat
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It is because of the capital allowances (tax allowable depreciation).
Because it is 10% straight line, it only continues for 10 years (and so we only get the tax benefit for 10 years).
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