Chapter 8 Managing Working Capital

Opportunity Cost (in place of Net Capital Spending) = $110,000 - tax. Tax = 0.34 × Profit, where Profit = Market Value - Book Value. Book Value = $250,000 - 4 × 50,000 (Depreciation per year) = $50,000. Profit = $110,000 - 50,000 = $60,000 and Tax = 0.34 × $60,000 = $20,400. Opportunity Cost = $110,000 - 20,400 = $89,600. Cash Flows: ................
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