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In the technical article on International investment appraisal part 2 the question states that scrap porceeds to be received at the end of the 5th year is 500m however while calculating the tax payable these proceeds are not considered. I am not sure why they ignored these proceeds.
The example in the article is not really a very good one.
Normally in exam questions the TAD is calculated on a reducing balance basis on the initial cost and in the year of sale the proceeds are subtracted from the tax written down value, resulting in a balancing charge or balancing allowance.
Here, the question says that the TAD is calculated on only part of the initial cost and is on a straight line basis. The sale proceeds are less than the initial cost and therefore the answer has assumed there to be no tax effect on the proceeds (because the question was silent on this). It is however an assumption and if this were to happen in the exam (which is not likely) then if you had assumed different you would still get the marks provided that (as always in Paper AFM) you stated your assumptions.
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