Exam 3 Equations

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6 Terms

1
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NPV

= PV inflows - cost

2
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Profitability Index

  • = PV of future cash flows / initial costs


3
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Payback Period

  • = # of years prior to full recovery + (amount to get to cost / full amount of year)


4
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Depreciation Basis

= original basis - accumulated depreciation

5
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Taxes

= sale price - tax basis

6
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Cash flows from sale

= sale proceeds - taxes paid