Capital Budgeting

Comrades, Page 86, question 46… If the equation for TNOCF = SALt + NWC inv- T(SALt-Bt) why has the last term -T(SALt-Bt) not been included in the solution??? One love.

oops i just noticed… question asks for NON OPERATING cash flow.

Correct me if I am wrong but I would class that as non-operating cash flow. T(Salt-Bt)

it appears replacing capital used directly in production is considered operating cash flow hence, the present of Salvage and Book values (beggining an end) when calculating Outlays & Termination Net Operating Cash flows… anyone knowledgable on this?

they are only TNOCF - Terminal Non-operating Cash Flow. (not Net)

so back to the original question, why wasnt the salvage value of 450,000 euros treated as the book value?

2750 Initial cost depreciation to zero. sold for 450 TNOCF= NWCINV returned = 75000 Equipment sold for 450 Book Value of equipment at the time of sale = 0 (since depreciated to 0) TNOCF=75+450-0.4*(450-0)=525-180=345000 Choice C – which is the answer. To answer your original question: Salvage Value is not book Value. Book value=Original Cost - Accum. Depreciation which is now 0.