Cash_Flow_Worksheet - Note Often the investment will...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Estimating Capital Budgeting Cash Flows I. Initial Investment (CF 0 ) - A. Purchase Price - B. Installation, Freight, Mocification, or other Acquisition Costs + C. Investment Tax Credit + D. Sale Price of Replaced Asset + E. Change in Taxes Due to Sale of Replaced Asset (Capital Gain or Loss) X (-t) (Book Value Market Value) + F. Required Investment in Working Capital II. Operating Cash Flows (CF 1 - T ) CF = (S - C)(1 - t) + D(t) +/- WC where, S = Sales or Revenues C = Cash Expenses (Expenses Other Than Depreciation) D = $ Depreciation t = Marginal Tax rate WC = Change in Working Capital During Period
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Note: Often the investment will generate a cost savings. This can be entered in place of (S - C) because it is the positive cash flow generated by the investment. An expense reduction is just as good as an increase in revenue. III. Terminal Value (CF T ) (Added to last operating cash flow when entering into calculator) + A. Salvage Value of Assets + B. Tax Effect on Salvage Value (Capital Gain or Loss) X (-t) (Salvage Value ≠ Book Value) + C. Recoup Working Capital Note: Capital Gain/Loss = Selling Price - Book Value...
View Full Document

This note was uploaded on 07/09/2011 for the course MK MK 640 taught by Professor Dr.lee during the Spring '11 term at Jefferson College.

Ask a homework question - tutors are online