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Dear Sir,
could you kindly explain to me how in Part 2 of (a) (sensitivity analysis of capex increase by 1m) the unrecovered TAD of 0.027 is calculated?
Thank you very much in advance.
The total of the FYA and the WDA’s for all of the years comes to 0.91.
They are entitled to total allowances equalling the original investment of 1.0.
So the balancing allowance is 1-0.91 = 0.09, and so the tax benefit resulting is 30% x 0.09 = 0.027.
If you are unsure about the way tax works then do watch my free Paper FM (was Paper F9) lectures on investment appraisal with tax.
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