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Unformatted text preview: eeds from sale of new asset
Proceeds from sale of new asset
Tax on sale of new asset
After-tax proceeds from sale of old asset
Proceeds from sale of old asset
Tax on sale of old asset
Change in net working capital
Terminal cash flow D3
0.40 $12,000 $64,000 Substituting into the equation yields
$30,000 (1 0.40)] $25,600 ($64,000 0.40) $55,600 The $55,600 of incremental cash inflow for year 3 is the same value as that calculated for year 3 in column 3 of
Table 8.9. 376 PART 3 Long-Term Investment Decisions Taxes on Sale of Assets
Earlier we calculated the tax on sale of old asset (as part of finding the initial
investment). Similarly, taxes must be considered on the terminal sale of both the
new and the old asset for replacement projects and on only the new asset in other
cases. The tax calculations apply whenever an asset is sold for a value different
from its book value. If the net proceeds from the sale are expected to exceed book
value, a tax payment shown as an outf...
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This document was uploaded on 01/19/2014.
- Fall '13