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Sir, for NPV calculation, i always deducted TAD first before arrive the taxable cash flow. But in this question, the answer is different from what i usually did.
“For Fubuki, the better answer dealing with the TAD is that shown in bold in the examiners answers (750 a year, and then 350 in the final year – the balancing allowance).”
This is what i quoted from one of your post.
So i did my answer in that ways as what i usually did. But idk if it’s right bcs the answer seems different and idk what part i do wrong.SO here, my answer is as follow for year ($000)
sale revenue = 3250
direct cost = (1560)
fixed cost = (1000)
TAD = (750)
———————
taxable cash flow = (60) loss
tax payable at 25%= 15
add back TAD = 750
and so on….till that part, did i do it correctly if i want to include the TAD into computation? i will proceed to second question relating to this after you have clarify.. thank you 😀
ahhh, i’m glad. So the tax payable figure will NOT be the same as the figure from the answer right?
because earlier, i thought the tax payable figure will be the same under both method.
The only thing that will be the same under both method is the final NPV figure?
The answer has the TAD as 650 per year. That is why you end up with different tax.
As I explained in the other answer you refer to, strictly the TAD should be 750 per year and the examiners note states that 750 a year would be given full credit.
In this post you said: https://opentuition.com/topic/p4-fubuki-question/
“Both methods will give the same answer for this question”
so, your statement here will only applied if the examiner use 750 for the current method it shown in the answer scheme ? Is that what you meant?
Both methods would be OK.
The fact the the examiner calculated the TAD in a different way is not a different method!!!
Yeah i know.
I’m just referencing to the figure they use. The final NPV figures would be different if they use 750 instead of 650 which they use now. That’s the reason why i can’t compare my final figure to the answer scheme.
I already figured out the part i’m confused. Thank you for your patience 😀
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