127000 20000 147000 4000 0 rm151000 purchase

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Unformatted text preview: (20,000) (147,000) + (4,000) + 0 (RM151,000) Purchase price of asset Shipping and installation Depreciable asset Net working capital Proceeds from sale of old asset Net initial outlay Step 1: Evaluate Cash Flows a) Initial Outlay: What is the cash flow at “time 0?” (127,000) + (20,000) (147,000) + (4,000) + 0 (RM151,000) Purchase price of asset Shipping and installation Depreciable asset Net working capital Proceeds from sale of old asset Net initial outlay Step 1: Evaluate Cash Flows b) Annual Cash Flows: What incremental b) Annual What cash flows occur over the life of the project? cash For Each Year, Calculate: For Incremental revenue Incremental - Incremental costs - Depreciation on project Incremental earnings before taxes Incremental - Tax on incremental EBT Tax Incremental earnings after taxes Incremental + Depreciation reversal Depreciation Annual Cash Flow For Years 1 - 5: For Incremental revenue - Incremental costs - Depreciation on project Incremental earnings before taxes - Tax on incremental EBT Incremental earnings after taxes + Depreciation reversal Annual Cash Flow For Years 1 - 5: 85,000 85,000 - Incremental costs - Depreciation on project Incremental earnings before taxes Incremental - Tax on incremental EBT Tax Incremental earnings after taxes Incremental + Depreciation reversal Depreciation Annual Cash Flow Annual For Years 1 - 5: 85,000 35%(85,000) 85,000 (29,750) (29,750) - Depreciation on project Incremental earnings before taxes Incremental - Tax on incremental EBT Tax Incremental earnings after taxes Incremental + Depreciation reversal Depreciation Annual Cash Flow For Years 1 - 5: 85,000 85,000 127,000+20,000 (29,750) (29,750) 5 (29,400) (29,400) Incremental earnings before taxes Incremental - Tax on incremental EBT Tax Incremental earnings after taxes Incremental + Depreciation reversal Depreciation Annual Cash Flow For Years 1 - 5: 85,000 85,000 (29,750) (29,750) (29,400) 25,850 25,850 - Tax on incremental EBT Tax Incremental earnings after taxes Incremental + Depreciation reversal Depreciation Annual Cash Flow For Years 1 5: 85,000 85,000 (29,750) (29,750) (29,400) 34%(25850) 25,850 25,850 (8,789) (8,789) Incremental earnings after taxes Incrementa...
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This document was uploaded on 02/11/2014.

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