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A machine is purchased on 1 January 2005 for $2m. It is estimated that it will be sold at 31 December 2006 for $350000. Tax rate is 30%. A balancing charge/allowance is claimed on disposal.
If cost of capital is 15% what is the pv of tax allowable depreciation at 1 January 2005?
Sir for this I am getting an answer of $1305000
but this doesnt seem to be included in the options and apparently correct answer is given as $391000, which I believe is tax relief pv. So is there a mistake in the question, which shud have asked calculate pv of tax relief or am I misinterpreting it?
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