1. The Flotsam Jetsom Boating company recently had a flood and is in need of repair to some of its docking stations in Florida. They are projecting an initial investment value of $50 million total Additionally, they expect to gain $10 million in Year 1, $13 million in Year 2, $16 million in year 3, $19 million in Year 4 and $22 million in Year 5. Your task is to find the payback period with uneven cash flow.

2. What is a loss for taxation purposes according to Division 36 of the ITAA (1997).

3. CSL Ltd has debts of $45,000 due in two years’ time and $230,000 due in seven years’ time. Given an interest rate of 6.12% p.a. compounding monthly, what single payment five years from today would extinguish both obligations?

Initial Cost = $50 million

The project will generate $39 millions of cash in first 3 years.

Cost to recover = $11 million

Cash in flow in forth year = $19 million

Time required = 11/19 = 0.58

Payback Period = 3 + 0.58 = 3.58 years Answer

Loss for taxation purposes according to Division 36 of the ITAA (1997) is when the total deductions available to the company exceeds its assessable income and net exempt income for the assessment year. Such loss is known as loss for taxation purpose.

Such loss can be carried forward and can be claimed as deduction from the assessable income of the future years, provided that the business operated by the company for which such loss has been incurred is carried out. If the company doesn't follows the rule of continuity of business and ownership of business which are necessary for transferring the losses, then the company will not be able to take benefit of any loss incurred previously.

Therefore loss for taxation purpose is nothing but the deductions that the company is able to claim over and above it's assessable income and the difference between these values is termed as tax loss.

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