Appendix

Содержание

1. Appendix
2. TAXATION We must also consider the impact
3. Слайд 3
4. TaxationThree tax effects to consider:Tax payments on
5. Writing down allowances
6. Example 1An asset is bought on the
7. Inflation rates Inflation is a general increase
8. Example: inflation of 10% per
9. Working capital in NPV questionsWorking capital is
10. Pro Forma NPV calculation
11. EXAMPLE 2CONTINUING FROM THE PREVIOUS EXAMPLE.
12. Слайд 12
13. Скачать презентанцию

TAXATION We must also consider the impact that tax will have on the return of an investment because most companies will be liable for corporation tax on the additional profits generated.

Слайды и текст этой презентации

Слайд 1Appendix
How to find the net cash flow ?

Слайд 2TAXATION
We must also consider the impact that tax will have

on the return of an investment because most companies will

be liable for corporation tax on the additional profits generated. There are three aspects to taxation, the good the bad and the ugly.

TAXATION We must also consider the impact that tax will have on the return of an investment

Слайд 3

Слайд 4Taxation
Three tax effects to consider:
Tax payments on operating profits
Tax benefit

from capital allowances and a possible tax payment from a

balancing charge on asset disposal
Tax relief on interest payments on debt
Tax payment normally is delayed by one year

TaxationThree tax effects to consider:Tax payments on operating profitsTax benefit from capital allowances and a possible tax

Слайд 5Writing down allowances

Слайд 6Example 1
An asset is bought on the first day of

the year for £10,000 and will be used for four

years after which it will be disposed of (on the final day of year 4) for £2,500. Tax is payable at 30% one year in arrears.
Required: Calculate the writing down allowance and hence the tax savings for each year.
Answer – Example 1
Year £ Tax saving Timing
(cash flow) (year + 1)
1 Initial investment 10,000

W.D.A.(@25%) 2,500 (@ 30%) = £750 yr 2

2 W.D.V. 7,500

W.D.A. 1,875 = £563 yr 3

3 W.D.V. 5,625

W.D.A. 1,406 = £422 yr 4

4 W.D.V. 4,219

Disposal value 2,500

BA/BC 1,719 = £516 yr 5

Example 1An asset is bought on the first day of the year for £10,000 and will be

Слайд 7Inflation rates
Inflation is a general increase in prices leading

to a general decline in the real value of money

Under

the situation of inflation,
Real return for the use of funds
Additional return to compensate for inflation

Inflation rates Inflation is a general increase in prices leading to a general decline in the real

Слайд 8Example:
inflation of 10% per year on variable

costs:

2008 variable cost per unit $100
Inflation adjusted variable cost:

100 X (1+ 10%) = $110

Example: inflation of 10% per year on variable costs:2008 variable cost per unit $100Inflation adjusted

Слайд 9Working capital in NPV questions
Working capital is treated as an

investment at the start of the project
Any increases during the

project are treated as a relevant cash outflow
At the end of the project the working capital is ‘released’ – an inflow
The working capital requirement may be given as a % of (usually) sales

Working capital in NPV questionsWorking capital is treated as an investment at the start of the projectAny

Слайд 10Pro Forma NPV calculation

Слайд 11EXAMPLE 2
CONTINUING FROM THE PREVIOUS EXAMPLE.

WE ARE FURTHER TOLD THAT NET CASH FROM TRADING FROM

THIS INVESTMENT IS £4,000 PER ANNUM.
THE COST OF CAPITAL IS 10%.
THE COMPANY HAS NO OTHER SOURCES OF INCOME.
REQUIRED:
CALCULATE THE NET PRESENT VALUE (NPV)