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Hi All,
I have a problem with this question, namely why both finance & operational lease cash tax relief inflows are calculated as:
Finance lease
(150,000 x 0.3) x 3.17 (annuity factor for 4 years) and then all is divided by 1.1 ????
[(150,000×0.3)x3.17]/1.1
thanks
Marcinhi marcin,
I’ll attempt to answer the question but im not sure if im right
we are looking to arrive at the tax relief from the Writing Down Allowance from the lease rental payments, which would be:
150000 x 0.3 = 45000
However remember in the question it said that “Assume that tax is payable one year after the end of the accounting year…”
Thus the relief will be in Year 2.we have to adjust the present value annuity to reflect this…
so taking the annuity for 4 years and divide it by the 1 + discount rate:3.170/1 + .10 = 2.882
This will be the annuity Discount factor at 10% to use. then multiply by the tax relief of 45000
45000 x 2.882 = 129690
I’m a lil off but thats the basic jist i guess…
Hope it helps…
anyone else is free to correct me if im wrong…- Topics: 0
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THANK U FOR THIS ONE TO ME IS MUCH FASTER WAY (45000*2.882)
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HOW DO U GUYS FEEL ABT THIS EXAM
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