12 table 89 incremental relevant operating cash

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Unformatted text preview: achinea (2) Incremental (relevant) [(1) (2)] (3) 1 $164,000 $137,520 $26,480 2 183,200 125,520 57,680 3 162,400 106,800 55,600 4 151,200 90,000 61,200 5 151,200 78,000 73,200 6 8,000 0 8,000 aFrom final row for respective machine in Table 8.8. 12. The following equation can be used to calculate more directly the incremental cash inflow in year t, ICIt. ICIt [ PBDTt (1 T)] ( Dt T) where PBDTt Dt T change in profits before depreciation and taxes [revenues (excl. depr.)] in year t change in depreciation expense in year t firm’s marginal tax rate expenses Applying this formula to the Powell Corporation data given in Tables 8.5 and 8.6 for year 3, we get the following values of variables: PBDT3 ($2,520,000 $2,300,000) ($2,400,000 $220,000 $170,000 $50,000 $2,230,000) CHAPTER 8 Capital Budgeting Cash Flows 375 Review Questions 8–13 How does depreciation enter into the calculation of operating cash inflows? 8–14 How are the incremental (relevant) operating cash inflows that are associated with a replacement decision calculated? LG6 8.5 Finding the Terminal Cash Flow Terminal cash flow...
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This document was uploaded on 01/19/2014.

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