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Unformatted text preview: e statement format involves adding depreciation back to net profits after taxes and gives the operating cash inflows associated with the proposed and present projects. The relevant (incremental) cash inflows are the difference between the operating cash inflows of the proposed project and those of the present project. LG5 Find the terminal cash flow. The terminal cash flow represents the after-tax cash flow, exclusive of operating cash inflows, that is expected from liquidation of a project. It is calculated by finding the difference between the after-tax proceeds from sale of the new and the old asset at project termination and then adjusting this difference for any change in net working capital. Sale price and depreciation data are used to find the taxes and the after-tax sale proceeds on the new and old assets. The change in net working capital typically represents the reversion of any initial net working capital investment. LG6 (Solutions in Appendix B) Book value, taxes, and initial investment Irvi...
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This document was uploaded on 01/19/2014.

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