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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › NPV and capital allowance
1)Sir suppose machine was not allowed tax allowable depreciation and NPV on machine came positive e.g 25000, now suppose in another scenario on the same machine tax allowable depreciation was allowed, so the already positive NPV will rise na because of tax savings on capital allowance e.g it will become 30000? right?
2)Sir suppose machine was not allowed tax allowable depreciation and NPV on machine came negative e.g – 25000, now suppose in another scenario on the same machine tax allowable depreciation was allowed, so the already negative NPV will rise or will it fall because of tax savings on capital allowance? e.g would it become -30000 or would it become -20000?
Tax allowable depreciation makes the NPV higher. Therefore a +’ve NPV will become more +-‘ve NPV will become less negative.
