GoG is considering a proposal to construct a new bypass around city “A”. The proposal will involve an initial cost of $60 million (for construction) and $2.25 million annually for maintenance. The bypass has an estimated life of 20 years during which it is expected to yield social benefits of $9.75 million every year. (i) Using a discount rate of 8%, calculate the BCR of the proposed project (ii) Interpret your answer for (i) (iii) Based on your results make a recommendation to GoG

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A:

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.