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hi i have issues solving Q118 i found the tax allowable Dep’n i couldnt solve ahead
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) = $127,050This the inflow after tax of 30%, therefore the revenue (before tax) must be 127,050 / 0.7 = $181,500
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