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How do we write the tax amounts for NPV analysis when the questions says ” tax is paid at the end of the year” ? Tax amounts are written in the year it occurs or… ?
I have only seen NPV analysis questions asking ”tax is paid one year in arrears” . So in the answers we would include Year 1’s tax amount in year 2.. year 2’s tax in year 3 and so on.
If tax is one year in arrears, then it is as you have written – year 1’s tax is paid at time 2, etc.
If tax is immediate, then year 1’s tax is paid at time 1, year 2’s tax is paid at time 2, etc..
This is all explained, with examples, in my free lectures on relevant cash flows for investment appraisal.
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