FINA3310_MID03_Formula Sheet - FORMULA SHEET FOR MIDTERM 3...

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FORMULA SHEET FOR MIDTERM 3 Chapter 7 Chapter 8 Initial Investment=Initial (installed) cost of new asset - after tax proceeds from sale of old assets±ΔNWC=Initial (installed) cost of new asset - ATSV OLD ± ΔNWC o Initial cost=purchase price + installation costs o after tax proceeds from sale of old asset or ATSV old = MV old – ((MV old – BV old ) x T) o Change in NWC or ΔNWC = NW CEND -NW CBEG =(C AEND -C LEND )-(C ABEG -C LBEG ) Note: If the change in NWC is positive (indicating a cash outflow, an expense) and occurs at the beginning of the life of the project because it is an expense it will be added to the initial investment (expense) and if it is negative it will be subtracted. If you have an increase in NWC in the beginning then at the end of the life of the project you will have a decrease of NWC of the same size (a cash inflow) and it will be added to the terminal cash flow. The opposite applies in the case of an initial decrease in NWC which is then followed by an increase in NWC at the end of the life of the project.
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FINA3310_MID03_Formula Sheet - FORMULA SHEET FOR MIDTERM 3...

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