Hi, has the spreadsheet in CBE exam formula XNPV? And if so, what if we calculate the NPV in spreadsheet and take a bit different (more exact) result? Or are we expected to use tables for calculation of NPV, but do not use formulas? Thank you for informative lecture btw:)

NPV in the answer in notes i think is wrong, i don’t know but if i put all values in excel and calculate it with formula it gives me 7101.83= 7102. can you please confirm this, because even in notes its showing wrong value. Thanks for the lectures.

Hi Sir, please i need a little clarification. In calculating the tax savings, why isn’t the corporation tax percentage calculated on the 7,500 but on the capital allowance in order to get the savings?

Because it is only the capital allowances (the tax allowable depreciation) that reduces the taxable profit each year and therefore saves tax. This is a tax rule from Paper TX.

I have a doubt. In calculating the 3rd years balancing charge, since we selling the machine at end of the year don’t we need to calculate the NBV of machine at the end of the year. and if so, the balancing charge would go up. Am i right?

They rule I work through in the lecture is the correct tax rule in that there is no writing down alliance in the last year, just the balancing charge or allowance. If you do put a writing down allowance in the final year, the balancing charge or allowance will change but the net affect will end up being exactly the same so it doesn’t really matter in the exam.

Hello John, Thanks for these beneficial lectures. While solving using the BPP practice and revision kit to prepare evaluations / calculate NPV, I noticed that when we are dealing with depreciation, they are not including the depreciation expense in the calculations (as this is important to calculate correct income tax). If they say it is included in variable/fixed costs, then it(depreciation expense) should be added back to the net cash flow as this is a non-cash item. I am really confused, am I missing anything here? Ref.: Example No. 163 Uftin Co (December 2014, amended; page 60). Thanks in advance.

Thank you Sir for great lecture, I was reading it in Study Text but I got impression it’s difficult to remember. Now, after watching the lecture all makes sense. Thanks to your lectures I have already scored 82 in PM, now I hope to pass FM 馃檪

Hi Sir, if so happens there is no scrap value, will there be a balancing charge/allowance? Or do we just count the final year as tax allowable depreciation?

By all means do that if you want, but it then means either showing the tax calculation as separate workings or remembering to add back the depreciation after calculating the tax because the depreciation is not a cash flow.

Eldor488 says

Hi, has the spreadsheet in CBE exam formula XNPV? And if so, what if we calculate the NPV in spreadsheet and take a bit different (more exact) result? Or are we expected to use tables for calculation of NPV, but do not use formulas? Thank you for informative lecture btw:)

zunaibkhan says

NPV in the answer in notes i think is wrong, i don’t know but if i put all values in excel and calculate it with formula it gives me 7101.83= 7102.

can you please confirm this, because even in notes its showing wrong value.

Thanks for the lectures.

John Moffat says

You are correct – thank you. I will have it corrected 馃檪

ewurefua says

Hi Sir, please i need a little clarification. In calculating the tax savings, why isn’t the corporation tax percentage calculated on the 7,500 but on the capital allowance in order to get the savings?

John Moffat says

Because it is only the capital allowances (the tax allowable depreciation) that reduces the taxable profit each year and therefore saves tax. This is a tax rule from Paper TX.

fareedfardhan@gmail.com says

Hi

I have a doubt. In calculating the 3rd years balancing charge, since we selling the machine at end of the year don’t we need to calculate the NBV of machine at the end of the year. and if so, the balancing charge would go up. Am i right?

John Moffat says

They rule I work through in the lecture is the correct tax rule in that there is no writing down alliance in the last year, just the balancing charge or allowance. If you do put a writing down allowance in the final year, the balancing charge or allowance will change but the net affect will end up being exactly the same so it doesn’t really matter in the exam.

Wael1984 says

Hello John,

Thanks for these beneficial lectures.

While solving using the BPP practice and revision kit to prepare evaluations / calculate NPV, I noticed that when we are dealing with depreciation, they are not including the depreciation expense in the calculations (as this is important to calculate correct income tax). If they say it is included in variable/fixed costs, then it(depreciation expense) should be added back to the net cash flow as this is a non-cash item. I am really confused, am I missing anything here?

Ref.: Example No. 163 Uftin Co (December 2014, amended; page 60).

Thanks in advance.

John Moffat says

Please ask this question in the Ask the Tutor Forum and not as a comment on a lecture.

valentini says

Hi John, I am trying to watch the lecture but it is saying is not available. Can you please advice how I can watch it? Thanks

John Moffat says

The lecture is working fine. If you are still having problems then please ask in the ‘technical problems’ forum and admin will try and help you.https://opentuition.com/forum/technical-problems/

opentuition_team says

it has been fixed

tcbroomfield says

Thank you very much for the lectures John – very clear explanations

John Moffat says

Thank you for your comment 馃檪

RobChaitezwi says

Wasn’t the net cash flow in year 3 supposed to be 13,463? 8,000-2100+563+6000+1000

KHall92 says

i got the same!

John Moffat says

Yes – my mistake (but the printed answer in the notes is correct 馃檪 )

daarmc says

Hi, why do we have to do 30% of the capital allowance, is the whole of the capital allowance not allowed?

John Moffat says

The whole amount is allowed, but with tax at 30% the tax saving is 30%.

ewelinagabiec says

Thank you Sir for great lecture, I was reading it in Study Text but I got impression it’s difficult to remember. Now, after watching the lecture all makes sense. Thanks to your lectures I have already scored 82 in PM, now I hope to pass FM 馃檪

John Moffat says

Thank you for your comment, and congratulations on passing Paper PM with such a good mark 馃檪

JojoBeat says

Hi Sir, when do we use the post tax cost of borrowing instead of pre tax?

John Moffat says

We always use the post-tax cost of borrowing when calculating the WACC for the purpose of appraising projects.

(The pre-tax cost is really the rate of return demanded by investors and that is relevant when calculating the market value of debt borrowing.)

JojoBeat says

Hi Sir, if so happens there is no scrap value, will there be a balancing charge/allowance? Or do we just count the final year as tax allowable depreciation?

John Moffat says

The rule does not change, which means that there will be a balancing allowance in the final year of the amount of the tax written down value.

JojoBeat says

Hi Sir, wouldn鈥檛 it make more sense to take cash flow minus depreciation and get the taxable profit then charge tax on that?

John Moffat says

By all means do that if you want, but it then means either showing the tax calculation as separate workings or remembering to add back the depreciation after calculating the tax because the depreciation is not a cash flow.