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Hi sir. i dont really understand why the answer for tax relief for year 4 is $186000. my answer is $236000.
The tax written down value after the first three years is 2,500 – 625 – 469 – 352 = 1054.
The sale proceeds are 125. Therefore there is a balancing allowance of 1054 – 125 = 929 and the tax saving resulting is 929 x 20% = 186.
Have you watched my free lectures on investment appraisal with taxation where this is all explained? The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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