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Sorry I am probably missing something quite basis here but just a quick query on the tax working for the investment proposal in question 3.
What is the reason for adding back the depreciation in this as opposed to just carrying out the normal taxation working as a separate working?
Thanks,
PadraigYou can show the tax calculations as separate workings and you will end up with the same answer.
It is simply that to save time the examiners answer subtracts the depreciation in the NPV calculations (because tax is calculated on the profit after the tax allowable depreciation) and then adds it back because the depreciation is not a cash flow.
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