• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Capital investment decision questions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Capital investment decision questions

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • January 11, 2022 at 12:35 pm #645660
    dumi008
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Hello Sir,

    I am doing a Cash Flow table to calculate the NPV of investment for 5 years.

    There is the Redundancy Pay of 18 million paid at year 5 prices. Should I deduct it from the contribution? or what is the right way to include Redundancy Pay in NPV calculations?

    If I do, I get a negative taxable cash flow(loss) and the tax at 30% would be 0 for that year, right?

    Also, can I add the tax-allowable depreciation back for that year (when loss incurred) even the tax paid was 0 ?

    Thank you and sorry if the questions may be confusing.

    January 12, 2022 at 8:30 am #645721
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51920
    • ☆☆☆☆☆

    For the redundancy pay you show a cash outflow at time 5 of the 18 million as inflated for 5 years.

    As far as a negative cash flow is concerned, it results in a tax saving. The reason is that (certainly for Paper FM) we always assume that the company is already making profits and is therefore already paying tax. If a new project makes a ‘loss’ in any year, then this is simply reducing the profit that the company is currently making. Therefore it means they pay less tax in total, so the project ‘loss’ results in a tax saving.

    I do explain both points in my free lectures on investment appraisal.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • Asif110 on FM Chapter 12 Questions – Sources of finance – debt
  • Naseam on Chapter 8 – Partnerships – ACCA Taxation (TX-UK) lectures
  • ty0311 on Project management – ACCA Strategic Business Leader (SBL)
  • moe544 on ACCA AB Chapter 20 – Microeconomics – Questions
  • opentuition_team on Relevant cash flows for DCF Taxation (example 4) – ACCA Financial Management (FM)

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy