Q Warden (12/11)

I am away from home at the moment and cannot access the question. I will reply tomorrow when I am home.

Thanks sir and do reply :D

Hi, It's because tax is paid in arrears: First you calculate sales using 5 yrs annuity: 100,000 × $16 × 3.696 = $5,913,600 than you calculate tax based on ALREADY discounted sales: $5,913,600 × 30% = $1,774,080 But this amount of tax must be additionaly multiplied by 1/(1+11%) = 0.901 ("moved back by one more year") to take into account payment of tax in arrears. 1,774,080 x 0,901 = 1598,4 Alternative solution: Sales: 100,000 × $16 × 3.696 = $5,913,600 Tax 1600 *30% = 480 - paid from year 2-6 so x 3,330 (4,231 annuity for 6 years - 0,901 - discount factor for 1 year) = 1598,4

Thanks alot.i appreciate it :)

Thanks for sorting it Seanah