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INVESTMENT DECISION

Financial Management

Sir, In ill 32 there is savings in wages and savings in scrap, and the tax rate is 30%, isn't this savings leading to opportunity cost in the tax shield because it's an expense and also tax deductible so shouldn't find the difference of extra tax and take that as opportunity cost while calculating the PI.

aman kawad

CA Inter

★ 7K+

27-Jun-20 18:32

357

Answers (4)

Do you mean illustration 32 about Alpha Company. Could you confirm the illustration please

Sudha Reddy

CA Final

★ 20K+

29-Jun-20 19:04

Sorry ma'am ill 13

Thread Starter

aman kawad

CA Inter

★ 7K+

29-Jun-20 19:07

Savings in scrap and wages is considered to compute PFAT, So tax effect on such savings is included in PFAT, which is used to compute PI. So there is no further scope of opportunity cost....

Sudha Reddy

CA Final

★ 20K+

29-Jun-20 19:40

Thanks ð???

Thread Starter

aman kawad

CA Inter

★ 7K+

29-Jun-20 19:45