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Respected sir,
I am not able to understand that why for leasing the tax is starting from time two when the payments are beginning from time 0. Is this because of January (start of the year) and not 31 December (end of the previous year).
If the payment is at the start of the year (time 0), then it reduces the taxable profit which is calculated at the end of the year (time 1). With a 1 year delay in the payment of tax, the tax effect is at the end of the second year, which is time 2.
This is all explain in my lectures on investment appraisal with tax, and on lease vs buy.
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
Thank you, sir, I have watched all your free lectures and they are really helpful..
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