Unformatted text preview: (c) proceeds from sale
of old asset, (d) tax on sale of old asset, and (e) change in net working capital.
8–10 How is the book value of an asset calculated? What are the three key
forms of taxable income?
8–11 What four tax situations may result from the sale of an asset that is being
8–12 Referring to the basic format for calculating initial investment, explain
how a firm would determine the depreciable value of the new asset. CHAPTER 8 LG5 Capital Budgeting Cash Flows 371 8.4 Finding the Operating Cash Inflows
The benefits expected from a capital expenditure or “project” are embodied in its
operating cash inflows, which are incremental after-tax cash inflows. In this section we use the income statement format to develop clear definitions of the terms
after-tax, cash inflows, and incremental. Interpreting the Term After-Tax
Benefits expected to result from proposed capital expenditures must be measured
on an after-tax basis, because the firm will not have the use of a...
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