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Sep/Dec 2016(Fernhurst co)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Sep/Dec 2016(Fernhurst co)

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • August 21, 2017 at 11:30 am #402752
    alpha2006
    Participant
    • Topics: 19
    • Replies: 18
    • ☆

    Ques(b) how did they got the 75% to discount the revenue cash flows.

    Always thanking you sir….

    August 21, 2017 at 3:16 pm #402784
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    They haven’t discounted at 75% – they have discounted at the cost of capital of 11% !!!

    The 75% is to get the revenue after tax of 25%. This is normal for sensitivity calculations.

    (For every $1 change of revenue, the taxable profit will change by $1 and therefore the tax payable will change by $0.25. So the change in the cash flow for every $1 change in revenue will be $0.75.(

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