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Dear John,
Please explain what WDA stands for?
I have come across it in lease buy discussions
If select Buy – include cost of item, residual value, maintenance and WDA’s?
Thanks
Writing down allowance (and it appears in most NPV questions, not just lease and buy.)
When tax is involved and we are buying a machine (not only if lease and buy is involved) then we always include all of the cash flows, which will include the cost, the sale proceeds, and the tax saving on capital allowances (tax allowable depreciation).You should know this from Paper F6 (or whatever exempted you from F6).
However it is all explained in the lectures on “relevant cash flows for DCF”.
(The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well)
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