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  • CIMA F3 Financial Strategy
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  1. tstan88 says

    March 10, 2020 at 2:20 am

    3.13 BPP
    a business has decided to install a new mechine. $50K , useful life five years with trade in value 10k at the end of the fifth year.

    the business could purchase the machine for cash, using bank loan facilities – cost of debt 9% after tax.

    the tax rate is 30%. and will be able to claim tax depreciation allowance in year 1. tax is payable with no delay.

    what is the PV of the purchase cost.

    Answer : 31700.
    (-50k X 1) + (7k x 0.650 ) + year 1 – 100% Tax saving (50×30% X 0.917).

    1thing i am confuse are its should expense off the tax saving for 10k trade in value. by 10k x 0.3 x 0.650 = 1.95k

    and my answer is 31700 + 1950 = 33650 cost?

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    • tstan88 says

      March 10, 2020 at 2:21 am

      Hi leature. please help on this. thank you

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      • tstan88 says

        March 10, 2020 at 3:28 am

        My mistake. 7k already included the tax deduction.

  2. bens1977 says

    January 9, 2020 at 6:41 pm

    Why does the lease start at T0 and not at T1?

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    • bens1977 says

      January 9, 2020 at 6:48 pm

      Ignore me i get it now 馃檪

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