AFM Sep/Dec 2016 Q2 B

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November 20, 2018 at 2:41 pm #485325
ibrabdelhakeem
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Please I have watched your free Paper F9 lectures on “Investment Appraisal Under Uncertainty Sensitivity Analysis”, but I still don’t know how the answer of the AFM Sep/Dec 2016 Q2 B, the answer multiplied the revenue of each year by the Discount factor and alos by 0.75 to reach an amount that is the divided by the NPV
My question is how did we get the 0.75? or why we used this?
Thanks in advance
November 20, 2018 at 3:24 pm #485333
John Moffat
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If the revenue changes then so does the tax 🙂
Every 1 less $ of revenue means 1 less $ of profit and therefore less tax is payable.
Since the tax rate is 25%, the net effect is 75% x the change in revenue.
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