Management Accounting 2 Group Assignment

Q1,
Step 1:CA for a specialist machine Year CA WDV $ $ 0 180,000 1 (180,000*25%)45000 135,000 2 (135,000*25%)33750 101,250 3 (101,250*25%)25313 75,937

Step 2:Calculation of Corporation tax Year 1 2 3 $ $ $ Sales revenue 190,000 190,000 190,000 (-) Materials 70.000 73,500 77,175 (-) Labor 40,000 42,000 44,100 Operating cash flow 80,000 74,500 68,725 (-) CA 45,000 33,750 25313+75937=101,250 Taxable Profits 35,000 40,750 (32,525) Corporation Tax@33% 11,550 13,447.5 (21,792)

Step 3:Calculation NPV Year 1 2 3 4 $ $ $ $ Operating cash flow 80,000 74,500 68,725 (-) Tax - 11,550 13,447.5 0 Net Cash flow 80,000 62,950 55277.5 0 PV 67,797 45,210 33,644 0 Total PV 146,451 - Io 180,000 NPV= (33,349)
NPV is negative, so reject the project.

Q2,
The financial director’s approach to calculate the corporate taxes is different compared to that of the production director’s. The pre-tax profits of the two approaches are different which lead to different after-tax profits. The methods for depreciation are different. That is：

1. Their depreciation methods are different. Depreciation is the reduction in the book value of an asset due to usage