3 terminal cash flow cash flow components time line

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Unformatted text preview: ew asset and any after-tax cash inflows expected from liquidation of FIGURE 8.3 Terminal Cash Flow Cash Flow Components Time line for major cash flow components $25,000 Operating Cash Inflows $5,000 $4,000 $7,000 $6,000 $8,000 $7,000 $8,000 $8,000 $10,000 $9,000 0 1 2 3 4 5 6 $50,000 End of Year Initial Investment 7 8 9 10 362 PART 3 Long-Term Investment Decisions FIGURE 8.4 Relevant Cash Flows for Replacement Decisions Calculation of the three components of relevant cash flow for a replacement decision Initial investment Initial investment needed to acquire new asset After-tax cash inflows from liquidation of old asset Operating cash inflows Operating cash inflows from new asset Operating cash inflows from old asset Terminal cash flow After-tax cash flows from termination of new asset After-tax cash flows from termination of old asset the old asset. The operating cash inflows are the difference between the operating cash inflows from the new asset and those from the old asset. The terminal cash flow is the difference between the after-tax cash flows expected u...
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This document was uploaded on 01/19/2014.

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