Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Negative Taxable Cash Flow
- This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- July 27, 2019 at 9:37 am #525029
Hi, this is an answer from the APV question, calculating the Base Case NPV.
Year Equipment Operating CF Tax on CF TR on TAD. NCF
0 (1000) – – – (1000)
1 – 400 – – 400
2 – 450 (120) 75 405
3 100 400 (135) 56 421
4 – – (120) 139 19I am wondering if I changed the presentation style, the NCF should be the same. But how should I tackle the taxable loss of 62?
Year 0 1 2 3 4
OCF 400 450 400
-CA (250) (188) (462)
Taxable profit 150 262 (62) xxx??
Tax (45) (79)
Add CA 250 188. 462
Equipment (1000) 100
NCF (1000) 400 405 421July 27, 2019 at 8:07 pm #525070If a company is considering a new project in the same country, then a ‘taxable loss’ simply reduces the existing profits of the company which means they save tax. So there is a tax inflow as far as the project is concerned.
If the project is in another country, then a tax loss means no tax payable for that year, but the loss is carried forward and reduced the taxable profit in future years.
July 28, 2019 at 7:17 am #525105Hi John, so it means that by the second presentation style, there should have a positive tax in Year 4 right? Hence the 2 presentation should give the same answer.
July 28, 2019 at 3:30 pm #525131I have given you the rules for dealing with tax, but I cannot comment on the answers you wrote in your original post without seeing the whole question.
If it is a past exam question or a question from the BPP Revision Kit, then tell me which question and then I will be able to answer you.
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