Snehal K
02-05-08, 12:18 PM
F9 Errata Sheet
Page D4.4 – Para 2.1 Operating cash flows
The last paragraph and the last example in Para 2.1 should be read as:
Alternatively, investment projects may incur additional operating expenses. These will have the effect of reducing the overall profit levels of the business. If profits are lower, the tax paid will be lower. The adjustment required, therefore, in the NPV would be a tax savings shown as a cash inflow or as a reduction of outflow
Example
Belco Ltd, as above, realises that it will also incur additional operating expenses of $40,000 per annum. This will lower the company’s overall profit thereby reducing the amount of tax to be paid. The adjusted cash outflow on account of taxation would be $48,000 i.e. (200,000 – 40,000) x 30%.
Page D4.7 – Answer to Test Yourself 1
Please change the answer as:
NPV calculation
http://getthroughguides.co.uk/forum/imagehosting/16481af071ca1b4.jpg
NPV = 660,787
* 1.08 x 1.06 = 1.14. This gives a discount factor of 14%.
Page D4.4 – Para 2.1 Operating cash flows
The last paragraph and the last example in Para 2.1 should be read as:
Alternatively, investment projects may incur additional operating expenses. These will have the effect of reducing the overall profit levels of the business. If profits are lower, the tax paid will be lower. The adjustment required, therefore, in the NPV would be a tax savings shown as a cash inflow or as a reduction of outflow
Example
Belco Ltd, as above, realises that it will also incur additional operating expenses of $40,000 per annum. This will lower the company’s overall profit thereby reducing the amount of tax to be paid. The adjusted cash outflow on account of taxation would be $48,000 i.e. (200,000 – 40,000) x 30%.
Page D4.7 – Answer to Test Yourself 1
Please change the answer as:
NPV calculation
http://getthroughguides.co.uk/forum/imagehosting/16481af071ca1b4.jpg
NPV = 660,787
* 1.08 x 1.06 = 1.14. This gives a discount factor of 14%.