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    Home Assignment 02: Increamental Cash Flow at T 0

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    Farzan Yahya Habib
    The document provides information to calculate the incremental cash outflow at time 0 (t=0) for a capital investment project. It states that the purchase price of the new machine is $10,000, the market value of the old machine being replaced is $1,000, and the book value is $2,000. It then calculates that the decrease in net working capital is $2,000 and the tax on profits is 35%. Based on this, it determines that the incremental cash outflow at t=0 is -$6,650.

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    Home Assignment 02: Increamental Cash Flow at T 0

    Uploaded by

    Farzan Yahya Habib
    20 views1 page
    The document provides information to calculate the incremental cash outflow at time 0 (t=0) for a capital investment project. It states that the purchase price of the new machine is $10,000, the market value of the old machine being replaced is $1,000, and the book value is $2,000. It then calculates that the decrease in net working capital is $2,000 and the tax on profits is 35%. Based on this, it determines that the incremental cash outflow at t=0 is -$6,650.

    Original Title

    Solution 01

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    The document provides information to calculate the incremental cash outflow at time 0 (t=0) for a capital investment project. It states that the purchase price of the new machine is $10,000, the market value of the old machine being replaced is $1,000, and the book value is $2,000. It then calculates that the decrease in net working capital is $2,000 and the tax on profits is 35%. Based on this, it determines that the incremental cash outflow at t=0 is -$6,650.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    20 views1 page

    Home Assignment 02: Increamental Cash Flow at T 0

    Uploaded by

    Farzan Yahya Habib
    The document provides information to calculate the incremental cash outflow at time 0 (t=0) for a capital investment project. It states that the purchase price of the new machine is $10,000, the market value of the old machine being replaced is $1,000, and the book value is $2,000. It then calculates that the decrease in net working capital is $2,000 and the tax on profits is 35%. Based on this, it determines that the incremental cash outflow at t=0 is -$6,650.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 1

    Home Assignment 02

    Question 01
    Capital investment. Given the following information, what is the project incremental
    cash outflow at t = 0? Assume that replacement allows to sell the old machine.

    Purchase price of new machine -10000


    Market value of old machine 1000
    Book value of old machine 2000
    Tax rate on profits 35%
    Decrease in net working capital requirement 2000
    Solution 01

    Cash Out flows:


    Purchase price of new machine: -10000

    Cash in flows:
    Decrease in net working capital requirement 2000
    Market Value of Old machine 1000
    Tax on profits 0.35

    Working
    Book Value of Old Machine 2000
    Market Value of Old Machine 1000
    Loss on Old machine 1000
    Tax on the loss on Old Machine 350

    Final market Value of Old Machine after tax 1350

    Increamental Cash Flow at t=0


    Working

    Decrease in net working capital requirement 2000


    Final Market Value of old Machine after Tax 1350
    Purchase price od new Machine -10000

    Increamental Cash Flow at t=0 -6650

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