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(1) Capital Allowance :
My calculation :
‘000
Cost 3,000 Tax saved
WDA 25% 750 for year 1 to 3 563 (25% x 750x 3 years)for year 4
WDV 750
less WDA 750 88 (25% x (750-400))
less proceeds 400
Balance adjustment 400The acca answer total is 652 as the same with my calaculation. My question is that yearly amounts in the acca answer and my answer is different in the Base Case NPV. Kindly advice if my calculation is acceptable.
(2) Calculation of the discount factor . Kindly advice how to input the variables of this formula(formula used in acca answer) in a Canon F-604 Scientific Calculator. Plus why the cost of debt was not 7.5 but 4.5 in the formula.
(1)
The examiner actually says in his answer that full credit will be given if you have allowances of 750 for each of the first three years. However, the balancing allowance in year 4 is 350 (not 400). Cost was 3000, 3 years allowance at 750 is 2250. This means there is a written down value of 750. Subtract the sale proceeds of 400, leaves a balancing allowance of 350.
(2)
I can’t help you with this because I do not have that calculator! (Although I assume you mean the calculation of the discount rate, not the discount factor (because you can look up the factor in the tables)).
The Kd used in that formula should be the risk-free rate (which is approximated by government debt)
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