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Hello Teacher, I have an exercise about Present value saying.
The lease will be over 5 years with lease payments of $146,000 annually in advance. Tax is payable 1 year after the accounting year and the corporation tax rate is 25%. Maintanance is payable by the lessor and costs $20,000 per annum payable at the end of each year, including the last year in preparation for sale. The residual value is expected to be $40,000 ( the expected tax written down value at the end of the lease) and the lessor will retain that.
1) What is the present value of the maintenance cash flows, after tax?
2) What is the PV of the tax relief on the lease payments, after tax, to nearest $000?I do not understand how to find first the annuity factor and solve that.
Thanks in advance
The annuity factors are on the tables provided in the exam!
My free lectures on lease and buy explain everything relevant for this question. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
(Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they contain lots of exam standard questions, together with answers and explanations.)
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