Unformatted text preview: ate values
into the format in Table 8.10 results in the terminal cash inflow of $55,000.
After-tax proceeds from sale of proposed machine
Proceeds from sale of proposed machine
Tax on sale of proposed machine
Total after-tax proceeds—proposed
After-tax proceeds from sale of present machine
Proceeds from sale of present machine
Tax on sale of present machine
Total after-tax proceeds—present
Change in net working capital $50,000
17,000 Terminal cash flow $55,000 Review Question
8–15 Explain how the terminal cash flow is calculated for replacement projects. LG4 LG5 LG6 8.6 Summarizing the Relevant Cash Flows Hint Capital expenditures are critical to a firm’s
success, and these funds are
usually limited. Because of
this, the process of determining cash flows should be
finely tuned so that it is both
objective and realistic.
EXAMPLE The initial investment, operating cash inflows, and terminal cash flow together
represent a project’s relevant cash flows. These cash flows can be viewed as the
incremental after-tax cash...
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This document was uploaded on 01/19/2014.
- Fall '13