bpp examkit

The tax saving from the depreciation is 30% x 100% x $150,000 = $45,000 Therefore the net outflow at time 0 is 150,000 - 45,000 = $105,000. If the inflow is 2 years time is X, then the minimum amount is whatever makes the NPV equal to zero. Therefore X / (1.10^2) = 105,000. So X = 105,000 x (1.1^2) = $127,050 This the inflow after tax of 30%, therefore the revenue (before tax) must be 127,050 / 0.7 = $181,500