Dear Tutor,
Regarding the calculation of cash flow in the answer of Q2 (a), I don't understand why the disposal of land and building was not added. Because in the question it mentioned that the land and buildings will be disposed of at the end of the project and their tax exempt value is expected to increase at an annual rate of 30% throughout the four-year life of the investment. So why is it not a cashflow?
Many thanks in advance!
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Sep/Dec 2020 – Sample Questions Q2 (a)
5y ago#1It is a cash flow and it is added in the answer.
If you look at the line in the table labelled 'Investment cost' then at time 4 there is an inflow of 214.2, which is 75 x 1.3^4
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