Question
DB Ltd has invested in equipment costing 400,000 for a project that will start immediately and last 3 years. The equipment will be disposed of
DB Ltd has invested in equipment costing 400,000 for a project that will start immediately and last 3 years. The equipment will be disposed of in the third year of the project for 150,000. Capital allowances are available on the equipment expenditure at a rate of 18% per annum on a reducing balance basis, and a balancing allowance will be available in the year of disposal. The tax rate is 20% and tax is paid in the year to which it relates. What is the tax saving cash flow in year 3 that will result from the balancing allowance? a. 118,960 b. 30,000 c. 48,413 d. 23,792
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