Unformatted text preview: is the cash flow resulting from termination and liquidation of
a project at the end of its economic life. It represents the after-tax cash flow,
exclusive of operating cash inflows, that occurs in the final year of the project.
When it applies, this flow can significantly affect the capital expenditure decision.
Terminal cash flow can be calculated for replacement projects by using the basic
format presented in Table 8.10. Proceeds from Sale of Assets
The proceeds from sale of the new and the old asset, often called “salvage value,”
represent the amount net of any removal or cleanup costs expected upon termination of the project. For replacement projects, proceeds from both the new asset
and the old asset must be considered. For expansion and renewal types of capital
expenditures, the proceeds from the old asset are zero. Of course, it is not
unusual for the value of an asset to be zero at the termination of a project.
TABLE 8.10 The Basic Format
Terminal Cash Flow After-tax proc...
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This document was uploaded on 01/19/2014.
- Fall '13