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Sir , didnt gt examiner working
i tried like this , perpetuity
1/.11=9.090 -3.102 ( 4 yrs annuity)=5.99 for cashflows and tax
CA allowance =5.889 (10yrs ) – 3.102(4 yrs) =2.787before tax=2802 x 5.99 = 16784
tax=785 x 5.99 =( 4702)
CA=112 x2.787 = 312
=12394What you are doing for the cash inflows is fine (you can either discount using 1/r and then discount for a further 4 year (as the examiner has done), or you can take 1/r less the 4 year annuity factor, as you have done – both will give the same result (apart from rounding differences in the tables, which is irrelevant for the exam).
However, that only works for the flows before tax.
The tax saving on the capital allowances is only for 10 years and so needs to be dealt with separately.so my all workings is correct of inflows ,tax ,Ca ? as i took CA 10 yrs – rate 4 yrs =2.787
No. It is correct for the perpetuity part of the cash flows (but there are the first 4 years as well of course).
For the capital allowances – they are for 10 years. So years 1 – 10. You have just done 5 to 10, which is OK but only provided that you add on the 1 – 4 as well.
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