FIN 222 formulas PDF

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Tutorial 7 Cash Flow from Assets (CFFA) = OCF – net capital spending (NCS) – changes in NWC (ΔNWC) Initial Cash Outlay = Project Cost + Change in NWC Operating Cash Flows (OCFs) Tax Shield Approach: OCF = (Sales - Costs) (1 - T) + Depreciation * T (OCF = EBIT + Depreciation –Taxes) Top- down approach= sales –cost –taxes Bottom up approach= net income + depreciation Cash Flow From Assets (CFFA) = OCF – net capital spending (NCS) – changes in NWC (ΔNWC) FINDING OF NCS + Purchase price of the new asset – Selling price of the asset replaced (if applicable) + Costs of site preparation, setup, and startup +(-) Increase (decrease) in tax liability due to sale of old asset at other than book value DEPRECIATION: Straight-line depreciation D = (Initial cost – salvage) / number of years After tax salvage (market value): Book Value = Initial cost – accumulated depreciation Accumulated depreciation = (initial cost- selling cost) / no. of years Salvage – T*(Salvage – BV@ time of sale)

EAC = PV of the Costs / Annuity factor

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