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Hi, could you please clarify this for me:
A question stated that operating cash flows of an investment project are subject to corporation tax of 23%. No tax allowable depreciation is available on the initial investment. The initial investment has a residual value of 20% of cost. My question is whether the residual value is subject to tax of 23% or is not because tax allowable depreciation is not available?
The residual value of the initial investment is not subject to tax. Tax allowable depreciation is only applicable to the depreciation of the asset over its useful life.
The residual value represents the estimated value of the asset at the end of its useful life and is not considered taxable income
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