dear,
i hav some difficulty in capital budgeting pls solve me problem.
one machine cost of salvage value is 10 lakh , life 5 years, tax rate 35%
book value at the end of year 5 is Rs. 311000
gain on sale is Rs.689000
tax paid on such gain Rs.241150
salvage value net of sales Rs.758850 (1000000 - 241150)
my questions is this salvage value Rs.758850 will deductable when calculate cash outflow ?
Pls refer paduka publications books Ilustrations no. 24, page no. 20.43
regards,
jignesh
It won't deductible as cash outflow mate, it will be a net cash inflow at the end of 10 years( the salvage value after deducting taxes).
Since after 10 years you get an inflow of the amount mentioned as salvage value and you pay taxes, which is a cash outflow, so the net figure is considered as an inflow at the end of 10 years.
It will be taken as cash inflow at the end of 5th year. If there is any outflow also in the 5th year then we take outflow net of inflow.
Regards, CA Shakuntala Chhangani
Sorry I meant 5 years instead of 10 in my post. Got confused
what is more important is that u have guts to give answer.
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