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Sir,
In that question there is a statement written that:
“ATC makes sufficient profits from its other activities to take advantage of any tax loss relief available from this project.”
Sir : did this statement means that we do not have to carry forward tax losses to the years till
the profit arises.Second statement written:
“Any annual increase in working capital after the first year will be financed by internally generated funds.”
Sir : does this mean that initial working capital shown in column year zero and rest shown in a row under operating cash flows and then allow them to tax deduct
ORshould I show all the WC flows after taxation and after investment flows.
Sir I am little confuse in it as i have seen in one of a past paper it has done initial working capital shown in column year zero and rest shown in a row under operating cash flows and then allow them to tax deduct.
Kindly clarify
First question:
Yes – there will not be any tax losses (a ‘loss’ from this project simply reduces the overall profits of the business as a whole and therefore save tax that would otherwise be payables
Second question:
Two things: working capital never has any tax effect. Secondly it is usually required at the start of each year – therefore the amount need for the first year will be required at time 0 (the first year starts now – time 0)
SIR may i know how the relisable value is taken
it says that the after tax realisable value is 250-300 then how to know which one to take because examiner took 250
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