[silvergray545]

I'm doing this online homework we have and I'm stuck on these two questions. My professor never went over this in class and the text book is extremely vague which doesn't help anything.

We're working on the Capital Budgeting chapter. In question 15, I don't know how to find the net cash flow for year 3. The others are correct using the tax shield approach. In year 3, you have to include the sale of the asset. The market value is less than the book value of the asset. So we over depreciated the asset and should expect a tax refund, correct? Then, isn't the tax refund added back into the net cash flow for year 3? It keeps telling me that's wrong.

As for question 16, there's nothing like that in the book. I'm pretty lost. I'm guessing you take the market value of the asset after taxes and add it with the networking capital. Then find the present value of that number to find the initial investment? I'm not really sure.

Any help is appreciated. Thanks

[Kroy]

You might want to list the questions.

[silvergray545]

Originally Posted by Kroy

You might want to list the questions.

I realized I forgot to upload the screenshots lol

[silvergray545]

What do they mean by reduce working capital and pretax cost savings? They aren't explained in the book. Where does the one time reduction take place? And are the cost savings subtracted from the initial costs? Or capital spending?

[BayMoWe335]

I just got a chill down my spine from my finance days.

Sorry, forgot enough to not be much help here.

[UBERV8]

Originally Posted by BayMoWe335

I just got a chill down my spine from reading this.

Fixed

[silvergray545]

I enjoy finance. But I hate teaching myself this stuff. When it's taught to me, I understand it.

I figured out number 16.

[silvergray545]

Just figured out 17 also.

[silvergray545]

I've been sitting in front of this computer since 2. My brain is done for. If anyone knows how to do 15, 18 and 20, let me know.