Installed cost of new asset as shown in table 82 the

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Unformatted text preview: price of the asset, adjusted for any change in net working capital, is equal to the initial investment. Installed Cost of New Asset As shown in Table 8.2, the installed cost of the new asset is found by adding the cost of the new asset to its installation costs. The cost of new asset is the net outflow that its acquisition requires. Usually, we are concerned with the acquisition of a fixed asset for which a definite purchase price is paid. Installation costs are any added costs that are necessary to place an asset into operation. The Internal Revenue Service (IRS) requires the firm to add installation costs to the purchase price of an asset to determine its depreciable value, which is expensed over a period of years. The installed cost of new asset, calculated by adding the cost of the asset to its installation costs, equals its depreciable value. After-Tax Proceeds from Sale of Old Asset Table 8.2 shows that the after-tax proceeds from sale of old asset decrease the firm’s initial investment in the new asset. These proceeds are the diff...
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