[MookaClement]

Alright Sir, I have taken note of that.

No sir it does not show the workings. It only shows the figures.

Yes I have, I just started watching them this week. They have proven to be very insightful.
Thank you.

[MookaClement]

RS Ltd is considering using a machine made by BC Ltd. The machine would cost £60,000 and
at the end of a 4-year life is expected to have a resale value of £4,000, the money to be received
in year 5. It would save £29,000 per year over the method that RS Ltd currently uses. RS Ltd
expects to earn a DCF return of 20 per cent before tax on this type of investment.
RS Ltd is currently earning good profits, but does not expect to have £60,000 available
to spend on this machine over the next few years. It is subject to corporation tax at 35 per
cent and receives capital allowances of 25 per cent on a reducing balance basis.

I have been having trouble understanding how the how the tax relief on Writing Down Allowance in the 5th year was equal to £7500.
Kindly help.

[MookaClement]

RS Ltd is considering using a machine made by BC Ltd. The machine would cost £60,000 and
at the end of a 4-year life is expected to have a resale value of £4,000, the money to be received
in year 5. It would save £29,000 per year over the method that RS Ltd currently uses. RS Ltd
expects to earn a DCF return of 20 per cent before tax on this type of investment.
RS Ltd is currently earning good profits, but does not expect to have £60,000 available
to spend on this machine over the next few years. It is subject to corporation tax at 35 per
cent and receives capital allowances of 25 per cent on a reducing balance basis.

Hello Sir. How does the tax allowance on WDA amount to £7500 in year 5 for this question?
Because for year 2-4, am getting the tax allowance on WDA by multiplying tax allowance each year by the tax savings %

[Author]

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