Capital Budgeting

CFA Level II Corporate Finance
#1

Hi guys,

I am having a hard time to compute the Cash Flow for a Replacement Project, particularly on TNOCF. Would anyone be able to confirm those formulas pls ?

Initial Outlay: FCInv + NWCInv - Salv Old+ T(Slav Old - BV Old )

Ch in CF: (Ch Sales - Ch Costs) (1-T) + Ch Dep(T)

TNOCF : NWCInv + (Salv New - Salv Old) - T(Salv New - BV new) - (Salv Old - BV Old)

Salv: Salvage Value; Old: Old Machine; New : New Machine; Ch : Change; T: Taxes

Thanks

#2

for TNOCF: NWCInv+ (Sal New - Sal Old) - Tax [(sal New- BV New) - (Sal old - BV old)]

The Square brackets are all that seem to be missing …

#3

Very good. It makes more sense to me now.

Thanks