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Sir,
With regard to loss on disposal of a non-current asset, if I were to arrive to my FCF using a P/L statement, I add Loss on Disposal in Expenses so that it can impact tax.
Now considering Loss on Disposal is a non-cash expense, I will add it back however do I adjust the tax savings against it or against the proceeds from disposal that I would add as well?
Would there be a net of tax effect in this case?The loss on disposal is not a cash flow.
The sale proceeds are a cash inflow.
As far as tax is concerned there is a balancing charge or balancing allowance of the different between the sale proceeds and the tax written down value.
This is dealt with in our free lectures – best is to look at the Paper F9 lectures on investment appraisal with tax (because this is revision of Paper F9).
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