[ToanLMK]

Yes, it is. So do you have any advice for me 😀

[ToanLMK]

Dear Mr.John,

Thank you for your response.

In question 111 (Page 41 – Revision KIT Sep 2023 – June 2024)

The question is as follows:
SW Co has a 31 December year-end and pays Corporation tax at a rate of 30%, 12 months after the end of the year to which the cash flows relate. It can claim tax-allowable depreciation at a rate of 25% reducing balance. It pays $1m for a new machine on 31 December 20X4. SW Co’s cost of capital is 10%.

What is the present value on 31 December 20X4 of the benefit of the first portion of tax-allowable depreciation?

So my question is:
The KIT’s answer states the depreciation expense will be charged in Y0 so the tax relief will be received in Y1. I don’t understand why, the machine was bought on 31 December 20X4, why the depreciation expense would not be charged in Y1 instead of Y0

Please clarify this point for me. Thank you so much !!!

[ToanLMK]

Glad that you understand what I am asking as my English writing is not while well. I understand the logic of the finance cost for trade receivable management using the debt factor now. Thank you very much. Wish you have a good day.

[ToanLMK]

OMG !!! Your explanation is incredible. It is so clear, thank you, Mr. John.

[ToanLMK]

I understand now. Thank you so much. Wish you will have a good day ^^

[ToanLMK]

Your example is perfect, thank you a lot Mr.John ^^

[ToanLMK]

Thank you so much, this is exactly what I am looking for ^^

[ToanLMK]

I understand now, you explained it very clearly. Thank you so much Mr.John. Wish you have a lovely weekend ahead.

[ToanLMK]

You make it so clear, I understand now. Thank you so much, Mr.John

[Author]

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