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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?
March 10, 2020 at 2:21 am
Hi leature. please help on this. thank you
March 10, 2020 at 3:28 am
My mistake. 7k already included the tax deduction.
January 9, 2020 at 6:41 pm
Why does the lease start at T0 and not at T1?
January 9, 2020 at 6:48 pm
Ignore me i get it now 🙂
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