Costing Paper Quest 7(b) Wrong

no , its correct question

icai copies this que from some whre and deleted the clause of tax rate but they forgot to edit this line....its fine..no tax rate means evry figure is net of tax

 here we have to assume a tax rate

In that question,

Commission Income Rs.12000/-p.a. is given.............

Is there any treatment is required for calculating NPV & PI Index?

Question is absolutely correct, and as mentioned by Yash, we have to assume a tax rate for comuting CFAT...

 Thanks friends.....ya it seems ke quest was right.......

What if some body has ignore the tax rate and not adjusted gain of tax because of depreciation?

There will no gain on account of realization of Machine as WDV will be equal to Salvage Value, but the effect of tax will be on account of Tax Saving on Depreciation... but on the other hand Tax on Operating Profit i.e. outflow, and that may cause change decision about the project... may be result will be same, but NPV definitely will be different..

As the question is indicating that there is a Tax Burden (commission net of tax, that a indication) and hence it is right practice to assume TAX Rate, otherwise your evaluation shall be wrong and hence, your result also be wrong.. so if somebody has not taken TAX Effect, then his/her ans may be wrong, but dont worry, its a practical sub and hence some marks may be alloted...

Question was right you have to assume tax percentage

 we have ta fing out incremental benefit , that is while finding cfat from the new machine , we have ta deduct the loss of the 120000 comissin , thats wat i think it should be , coz if it doesnt affect the new machine , the very purpose of capital budgeting fails which is choosing btw 2 capital inv decisions , so one clause of commission would ideaaly effect the purchase of new machine , and ya the question is correct , no probs with the question 

Commission of Rs. 12,000 per annum net of tax shall be treated as opportunity cost and hence it shall be adjusted from CFAT from proposed project...

Net of tax basically implies that the depreciation tax shield has been included in the overall cost, something like saying that the incremental costs include the cost of depreciation lost. So basically..what you had to was to deduct the commission lost and find the net cash inflow.

question is right. we have to assume tax rate.

as commission outflow is after tax, so we have to compare after tax cach flows from the project and assume any tax rate