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Hello sir.i have some questions to clear my doubts specially NPV
1) if in question it is written as cash flow started at the start of year FOR example (T1); we shall treat as previous year (T0)2)if cash flow is in (T0) and question is silent about corporation tax (when to start). Where will we adjust tax in T1 or T2
3)if tax is in one year arrear and cash flow is in T0 where we need to adjust tax T1 T2 or T3
4) LAST for tax allowable benefits.
It goes to the same period where corporation tax goes? Correct me if I am wrong.
Thanks John1. T0, T1 etc. are points in time that are one year apart.
T0 is the start of the first year.
T1 is the end of the first year / start of the second year
T2 is the end of the second year / start of the third year
etc.2. Questions always state whether tax is payable immediately or whether it is payab one year in arrears.
3. Tax is calculated at the end of the year (when it is paid depends on what the question says with regard to note 2. If the cash flow is at time 0, then the tax is calculated at the end of the year (time 1) and is payable one year later (at time 2).
4. The only tax allowable benefit is tax allowable depreciation (capital allowances) and again they are calculated at the end of each year and the tax saving is either immediate or one year later depending on the timing given in the question.
All of this is explained in detail in my free lectures on investment appraisal.
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