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  3. a company is planning an investment of 5,000,000 t

A company is planning an investment of 5,000,000 today. The investment is depreciated on a...

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Accounting

A company is planning an investment of 5,000,000 today. The investment is depreciated on a straight-line basis over the life of 5 years and the residual value at the end of the project is assumed to be 500,000. The investment will generate the following income over the next five years: 4,000,000, 4,500,000, 5,000,000, 5,500,000 and 6,000,000. Payable operating expenses (operating expenses excluding depreciation) will amount to 60% of the income in the individual year. The annual working capital requirement is assumed to be 10% of the following year's turnover. The project will be part-financed with a serial loan (repaid with equal annual installments over the project's lifetime) of 5,000,000 at an interest rate of 2% pa. The project's tax rate is 20%.

If we use the equity method, what is tax calculated in year 3?

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