Fernhurst Co (SEP/DEC 16)

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January 15, 2020 at 5:17 pm #558789
unfazed
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Sir,

Part (b)
In the Kaplan revision kit, for arriving at the discounted revenue cash flows figure, May I know the reason why we discounted them by 25%?

If it is to account for tax, why just tax and not other expenses such as fixed costs etc

Thank you
January 16, 2020 at 7:46 am #558817
John Moffat
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It is because the question asks for the % change in the selling price.

It is therefore only the revenue (less tax) that will change. All the costs will remain the same.
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