Tax relief

Dear Sir,

There’s a problem in Kaplan exam kit which I’m unable to understand. My doubt is in relation to that.

For example, if cash flows occur in beginning of the year starting now (T0) and tax is paid one year after the accounting year end. Please tell me the timing of the tax benefits and if they were annuity, how would I discount them to the present value.

Also, what if cash flow occur at the end of the year and tax is paid one year after the accounting year end. Please tell me the timing of the tax benefits and if they were annuity, how would I discount them to the present value.

As per what I could understand, irrespective of the fact that cash flows occur at the beginning or end benefits start from t2 because we generate profits in period t1 and tax is paid one year after the accounting period. But the kaplan exam kit doesn’t follow so. Where the cash flow is in the end of the year. It finds the timing of tax relief to be t2-t5, finds the 4 year annuity factor and multiply with PV of 2nd year to get Pv at T0 whereas for the problem where cash flow occurs at the beginning of the year it again shows timing of tax relief to be t2-t5, finds the 4 year annuity factor bur multiplies with PV of 1st year to ger Pv at t0. I don’t know why and how this difference in treatment occurs.

Please help me understand all this better and guide me if I am wrong or there is a print mistake in the exam kit which is confusing me. Sorry for the long doubt.

Thank you so much for your patience.

Regards,
Rajvir Singh Oberai.