CIMAPRO19-P02-1 Exam - Topic 3 Question 12 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 12
Topic #: 3

A company has a 31 December year end and pays corporation tax at a rate of 30%. Corporation tax is payable 12 months after the end of the year to which the cash flows relate. The company can claim tax allowable depreciation at a rate of 25% reducing balance. It pays $1 million for a machine on 31 December 20X4. The company's cost of capital is 10%.

What is the present value of the benefit of the first portion of tax allowable depreciation?

A$250,000

B$227,500

C$75,000

D$68,175

Show Suggested Answer

Suggested Answer: D

by Glory at May 09, 2022, 12:03 PM

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Salome

4 months ago

Yeah, I agree with Sabine, B feels accurate!

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Herman

4 months ago

Wait, how does the 10% cost of capital affect this?

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Sabine

4 months ago

Definitely leaning towards option B, $227,500 seems right.

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Lonna

4 months ago

I think the present value will be less than that due to the discount rate.

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Felton

5 months ago

The depreciation is 25% of $1M, so $250,000.

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Linwood

5 months ago

This seems like a straightforward question about corporate bonds. I'll review the key characteristics of each option to determine which one best matches the description.

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Isaac

5 months ago

Hmm, I'm a bit confused by the different VXLAN EVPN route formats in the options. I'll need to review my notes on the VXLAN EVPN address family and prefix representation.

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Coral

5 months ago

I'm feeling confident about this one. The SSAA maintenance is carried out during Phase 2 of the process.

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