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A company receives a perpetuity of $20000 per annum in arrears, and pays 30% corporation tax 12 months after the end of the year to which the cash flows relate.
At a cost of capital of 10%, what is the after-tax present value of the perpetuity? Sir in this question they are talking abouth not ony the taxes the cash inflows are also receiving in arrears but they didn’t consider in the question they taking it as normal
The question states that the company receives a perpetuity of $20,000 per annum in arrears, which means that the cash flows are received one year after the end of each year. #
However from what I can tell the question does not explicitly mention the cash inflows being received in arrears. It only focuses on the after-tax present value of the perpetuity.
Therefore, in this specific question, the cash inflows are assumed to be received at the end of each year (not in arrears) and the calculation is based on that assumption.
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