Overall if we do this we can use the firms cost of if

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Unformatted text preview: If capital as the discount rate for capital capital investment projects. investment Capital Budgeting Steps 3) Accept or Reject the Project. Accept Step 1: Evaluate Cash Flows Step a) Initial Outlay: What is the cash flow at a) Initial “time 0?” “time (Purchase price of the asset) (Purchase + (Shipping and installation costs) (Depreciable asset) (Depreciable + (Investment in working capital) + After-tax proceeds from sale of old asset After-tax Net Initial Outlay Net Step 1: Evaluate Cash Flows Step a) Initial Outlay: What is the cash flow at a) Initial “time 0?” “time (127,000) (127,000) + (Shipping and installation costs) (Depreciable asset) (Depreciable + (Investment in working capital) + After-tax proceeds from sale of old asset After-tax Net Initial Outlay Net Step 1: Evaluate Cash Flows Step a) Initial Outlay: What is the cash flow at a) Initial “time 0?” “time (127,000) (127,000) + ( 20,000) (Depreciable asset) (Depreciable + (Investment in working capital) + After-tax proceeds from sale of old asset After-tax Net Initial Outlay Net Step 1: Evaluate Cash Flows Step a) Initial Outlay: What is the cash flow at a) Initial “time 0?” “time (127,000) (127,000) +...
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