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During The Calculation of NPV of Purchase Option, Corporate TAX & Tax-Allowable Dep is added to the net cash flows where as normally we see Corporate Tax is deducted & Tax allowable Dep is added.
Kindly enlighten me as to why this was the case in this Questions.
You will have to tell me which past exam this question was in – I cannot remember then name of every question that has ever been asked 🙂
I would guess however that it is a lease buy question in which case we are looking only at the costs involved. More costs mean less profit and therefore a tax saving.
Thankyou Very Much, This Makes Sense.
Sorry for incomplete Question.
This question was in BPP KIT (157 AGD Co (FMC, 12/05, amended))
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