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Dear John,
while doing the practice math number 8 i have come across a few questions.those are follows:
1.the after tax cash flow on the fifth year is (16).how come?should not that be 92??
2.isnt the 4th yr after tax cash flow is 316 instead of 310? 660-300-108+34+30=316??
Looking forward to you reply.
Thanks in advance.
Leon Talukdar.The answer is correct – what has happened is that the typing has gone wrong.
The ‘taxable cash flow’ row should be moved one year to the right (so at time 1 it is 200, at time 2 it is 290, and so on)
Also, the ‘taxation’ row should be moved one year to the right (so 60 at time 2, 87 at time 3 and so on). (The tax is payable one year in arrears)The rest is OK (except that the discount factors are missing 0. at the start ).
Sorry about that – I will get admin to retype the answer.
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