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Cash Flows for a Replacement Project

andynykandynyk L2 candidatePosts: 1 New Hire

From the example in p.35 of the CFA level II note,

TNOCF = SalT + NWCInv – T(SalT – BT)

= (200,000 – 100,000) + 80,000 – 0.30[(200,000 – 100,000) – (0 – 0)]

= $150,000

Why does it consider the SalT and BT of the old equipment? It should be sold and replaced by a new equipment at T=0.



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