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DCF with taxation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › DCF with taxation

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • July 23, 2014 at 9:56 am #179442
    zaca
    Member
    • Topics: 18
    • Replies: 37
    • ☆☆

    Hi,
    I read Emile woolf and Bpp

    With the initial investment 3$ mil, useful life is 3 years, at the end of year 3, tax allowance dep’=15% on straight line basis , residual value = 0, tax is payable one year in arrears.

    year 0 1 2 3 4
    tax relieft 0.135(end of year 2) 0.135 (3) 0.63 (4) ( treatment in bbp book)
    tax relieft 0.135(end of year 1) 0.135 (2) 0.135 (3) 0.495 (4) ( treatment in Emile woolf)

    the result will be different because the different DCFactor, so which way is right?

    July 23, 2014 at 4:49 pm #179523
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Normally the line which you say is Emile Woolf would be the correct answer (although it is not the tax relief but the tax allowances – the relief would mean multiplying by the rate of tax).
    However, without seeing the full question, there could be something special in the wording which might have made BPP correct. However that would be usual.

    To see the full way of dealing with tax, why not watch my free lecture on here 🙂

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