MAF203 Lecture Notes - Lecture 7: Sensitivity Analysis, Scenario Analysis, Net Present Value
Document Summary
Are additional cash flows that occur as a result of taking on a project. A company owns machinery which has been leased out generating income of m per. Npv if the evaluation is done incorrectly and the opportunity cost is ignored (i. e. the lost. Npv if the evaluation is done correctly and the opportunity cost is included (i. e. the lost year. The machinery will now be used in a project which yields m a year for 2 years and costs. m (required rate of return is 10% p. a. ). Should the project be taken on? lease income of m per year is not included in the analysis): lease income of m per year is included in the analysis): * m = m revenue per year less lost lease income of m per year. Book gain on sale of productive asset: purchase price of asset (machine) m, useful life of machine 10 years, depreciation p. a.
