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SW co has 31 Dec year end and pays tax at a rate of 30%. 12 months after the year end to which cashflow relates. It can claim tax allowable depreciation at a rate of 25%reducing balance. It pays $1m for a machine on 31 Dec 20X4. SW co cost of capital is 10%. What is the present value on 31 Dec 20×4 of the benefit of the first portion of tax allowable depreciation?
Sir here in this question first cashflow is at the start of the first year (i.e time 0) or is it at the end of the first year (i.e at time 1)?
Also here initial investment would be shown at time 0 or at time 1?Initial investment is at time 0, and the first tax saving on capital allowance would be at time 1 ($75000), correct?
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