Capital Budgeting Numerical Solve Tricks



Capital Budgeting Numerical Solve Tricks

First of all divide the question into three parts

1-      Initial investment
2-      Subsequent cash inflow
3-      Terminal cash flow



FORMULAS

INITIAL INVESTMENT=cost of fixed capital + investment – sale price of old assets + tax on capital gain – tax saving on capital loss+ working capital

Subsequent cash inflow= sales –variable cost- fixed expense – depreciation- tax+ depreciation –capital expenditure
OR

Net profit + depreciation + interest (1-tax rate) – capital expenditure

Terminal Cash Flow = sales profit of new assets – tax on capital gain + tax saving capital loss + working capital. 


TO BE CONTINUED......................

Question related to capital budgeting in the next Blog......

 PREVIOUS WE DISCUSS ABOUT

Financial management and its aspects 
What is capital budgeting 


Links
 http://therafiamemonibf.blogspot.com/2018/09/what-is-capital-budgeting.html

http://therafiamemonibf.blogspot.com/2018/09/financial-management-and-its-aspects.html

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