Costing

Solution
- 1 2 3 4
Initial outlay (2,000,000)
Registeration Fee (35,000)
Tax beneift 10,500 Tax benfits will be claimed in 1st year tax return
Mobile prices (15,000)
Tax beneift 4,500 Tax benfits will be claimed in 1st year tax return
Insurance (50,000) (47,250) (44,100) (40,517)
Tax beneift 15,000 14,175 13,230 12,155 Tax benfits will be claimed in 1st year tax return
Net of tax rental 558,810 527,918 495,252 460,736 Working below
Tax savings on depri 150,000 112,500 84,375 230,625
Residual Value 75,000
(2,100,000) 691,560 610,493 552,340 778,516
Ahmed Raza Mir, ACA (ARTT Business School)

NPV (2,100,000) 617,464 486,681 393,145 494,761

NPV (107,948)

Cost 2,000,000
Residual Value (75,000)
Total Value depriciated 1,925,000

Tax savings 577,500

Year 1 (150,000)
Year 2 (112,500)
Year 3 (84,375)
Balancing allowance 230,625

- 1 2 3 4
Rental Income 1,800,000 1,800,000 1,800,000 1,800,000
Driver salary (945,000) (992,250) (1,041,863) (1,093,956)
Maintenance (56,700) (53,582) (50,635) (47,850)
798,300 754,169 707,503 658,195
Tax paid (239,490) (226,251) (212,251) (197,458)
558,810 527,918 495,252 460,736

Ahmed Raza Mir, ACA

 Costing
Solution

Alternative simplified solution (assuming tax benefits can be claimed immidiately)

- 1 2 3 4
Initial outlay (2,000,000)
Registeration Fee (24,500)
Mobile prices (10,500)
Insurance (35,000) (33,075) (30,870) (28,362) (25,526)
Net of tax rental 558,810 527,918 495,252 460,736
Tax savings on depri 150,000 112,500 84,375 230,625
Ahmed Raza Mir, ACA (ARTT Business School)

Residual Value 75,000

(2,070,000) 675,735 609,548 551,265 740,836
NPV (2,070,000) 603,335 485,928 392,380 470,814
NPV (117,543)

Ahmed Raza Mir, ACA