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1-Please explain how capital allowance is calculated?
I am satisfied with the F.Y.A calculation i.e 930, but how the capital allowance and so saving are calculated?2-How the Real cash flow has been converted to Nominal cash i.e 52(real) convert to 54.63(nominal) and so on.
I mean real cost of capital is given and by using the formula money=real x inflation we get 9.2%. What nominal rate is use for it and how is it calculated?Thanks. I solve the 2nd issue(Real cash flow).
Please explain only 1st problem, the one relate to taxThe first capital allowance is the first year allowance of 50% of 3,100, and you are happy with this.
This leaves a tax written down value of 6200 – 3100 = 3100, and the question says that this is claimed in equal instalments ofter three years. So for each of the next three years it is 3,100 / 3 = 1033.
The tax saving is 30% of the capital allowance each year.Part b Black-Scholes
Pa is 36.79 and Pe is 31.4.I dont understand how 36.76 is calculated, I mean to say the logic behind the calculation, i understand the calculation involve in but dont understand why we are doing?
Please explain this?
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