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Hello Mr Moffat,
Regarding MIRR, is tax savings on capital allowance should be included in investment phase or Return phase? I did some questions on BPP, and there was one particular question in Dec 2008 Blipton, where they included the tax savings in the investment phase while other questions it was part of return phase.
My second question is, what are the items apart from the capital invested that are included in the investment phase if there are any?
Thanks
Soud Saeed.There are no definitive rules.
However, since the tax savings result from the investment, it is more sensible to include them in the investment phase.
With regard to other items, although capital investment is the most likely only item in the investment phase, if there were any other early costs then they would be included as well.
If you are ever unsure in the exam then state your assumptions and you will be OK (because, as in real life, so much depends on what assumptions you make).
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