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Good evening
i just did an npv question from jun 15 (#5). there was a scrap amount of 500,000 at the end of the 4 years. the tax allowable depreciation was on straight line basis.
question: i added the 500k, then computed the tax..in other words, i calculated tax on the scrap amount. but the answer did not.
can u please explain why?
thank u
The tax is calculated on the difference between the scrap proceeds and the tax written down value (as in Paper F6). This results in either a balancing charge or a balancing allowance.
You need to watch the lecture on investment appraisal with tax, where the treatment of capital allowances is explained.
thank u .. i do listen to ur lectures which are just awesome….but sometikmes i need an answer quickly while doing the questions 🙂
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