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John in foreign investment appraisal when the question says tax allowable depreciation (TAD) we normally deduct the TAD to arrive at operating profit befor tax. Then we add back TAD to work out NPV as this not an actual cash outflow.
But what if i just work out the capital allowance and add the figure to Profit after tax (PAT) is not it going to be same instead odf deducting and adding back like i mentioned in the prior paragraph.
My process of working out capital allowance:
IF tax is 20%
TAD on machinary straight line basis during the life of project
Machinery 20million
project life 5 years
Than Tad is 4 million
Capital allowance 4m*20%=0.8million
now i just add 0.8 million to PAt and i guess we dont have to deduct TAD amount of 4million as operating cost to arrive at operating profit before tax and then Add again With PAT.
Your feedback on this would be highly appreciated.Thanks.No problem – you can do it either way and the result will be the same.
However, the way you write in your first sentence is generally quicker, if there is additional tax to pay in the home country. (for example, if the tax in the foreign country is 20% and you know the final tax figure, then if tax in the home country is 25% and therefore there is an extra 5% tax to pay, the extra tax will be 5/20 of the tax figure you have already calculated)
ok thanks.But i have seen you recomending in one of the Student forums queries that only time we have to deduct and add TAD when company makes losses that made me confused to be honest.Could you please kindly clarify this.
In Tramont co.(Pilot paper) they have actually deducted the TAD but why they did not add it back when doing NPV.This is so confusing.Please help for God sake.
As far as i am concerned i have asked this on a general forum created by someone else but you have not answered my particular query.You just mentioned only time we have deduct and add back is when there is a loss.I did not get this.I m a bit confused.Could you please kindly clarify.
Thank you.That is not what I said at all.
You really do need to watch the F9 lectures on how we deal with tax in investment appraisal because it is all explained there.
Ok thanks a lot john. But dont know why you appreciated Syedshah on WACC vs Capital Allowance comments that i am taking unfair advantage. I really did not like it. If you have any problem john you can let me know. I thought this forum is for asking queries and at the end of days i am not asking you to make me understand the whole topics to be honest.Just my confusions are highlighted here.And by the way i had taken tuition from a platinum tuition provider.I just had a gap year.I never had this problem before here. I took help when i did p2 and p7 and specially OBU from OT even though i took tuition and had my mentor for OBU.Once i have seen in one OBU forum where someone asked question to Trephena but another idiot like syedshah commented just like him but Trephena straightway asked him not to comment offensively on some else thread who is asking the tutor and reminded him he could be banned in future if he makes comments like this.Is not it unprofessional that syedshah commented on my thread which to me is offensive .its not about saving dollar or taking unfair advantage.People like syedshah may have cheap mentality like this.I just like OT. Thats it. Hope you understand.have a good day.
May taking help from Trephena has made the difference for me to achieve first class in OBU for which i will always be grateful to OT. You and Trephena and Mike little are the best tutor from whom i have taken help.Hope you understand that i am not here for taking unfair advantage or saving for $.I am sorry if i had troubled you a lot and thanks for your patience one second again.God bless.
I took tuition from kaplan in London Borough branch for many of my ACCA papers but i found OT is just more convenient for me when one of my mates recommended OT.Since than i have recommended OT to lots of upcoming ACCA students who strugled to get enough attention in their classes and they are reaping the benefits now as i know them personally.So it was never about saving $. I am not rich but i earn enough to atleast afford myself to take tuition which i have taken for all my ACCA paper from F1 upto p7 so far.But i had a gap year after taking on P4 tuition.John you helped me lot and cant describe enough in words how helpful and easy your lectures on P4 were. The best from my point of view. But i fell now i am not welcome here anymore.You are great at making people understand tough topics so easily and concisely. Hope you will continue to be like this for million more years. I still rate you as the best P4 teacher i have ever aquintted with. God bless and thanks a lot for your patience again.
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