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John Moffat.
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toushiga
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Hello Tutor, For Q1, The ASOP CO section (b) for calculation of the npv, why the examiner answer does not include the machine cost, scrap value license fees, tax saving on license fees?Thank you.
John Moffat
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They have been included.
The ‘present cost of financing’ was calculated in part (a) and includes them.
However, it would have been better to set out the flows again and discount at the WACC of 11%. The examiner mentions this in his note.
toushiga
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Thank you for your reply
I just find out they had included them in last part, but wonder the license fee has tax benefit on it?
John Moffat
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It is an expense, and will therefore reduce the taxable profit, and therefore will save tax.
toushiga
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