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Unformatted text preview: must be considered in the analysis. If the firm's sales would be reduced by $50,000, then the net cash flow loss would be a cost to the project. Note that this annual loss would not be the full $50,000, because Shrieves would save on cash operating costs if its sales dropped. Note also that externalities can be positive as well as negative. b. Disregard the assumptions in part a. What is Shrieves depreciable basis? Answer: Get the depreciation rates from table 12-2 in the book. Note that because of the half-year convention, a 3-year project is depreciated over 4 calendar years: YEAR RATE BASIS = DEPRECIATION 1 0.33 $240 $ 79 2 0.45 240 108 3 0.15 240 36 4 0.07 240 17 $240...
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- Spring '08