A company has just purchased a new delivery van. Now it is trying to decide whether to sell its old delivery van or donate it to a non-profit organization that delivers meals to the elderly. In estimating the incremental free cash flows for this decision, for which of the following should we adjust? Do not include factors that are only indirectly used to calculate other factors – only choose factors that should be directly considered, for their own sake, in the cash flow calculations (rather than in the calculation of another factor). For this particular problem, circle the letters of all of the answers that apply (i.e., you may choose to circle more than just one answer). a. The cost of the new van. b. The interest expense on the loan to buy the new van. c. Any reputation effect/goodwill resulting from donating the van to a worthy charity. d. The price that the company originally paid for the old van. e. The book value of the old van. f. The tax effect of donating the old van. g. The current market value of the old van. h. The tax effect of selling the old van.
A company has just purchased a new delivery van. Now it is trying to decide whether to sell its old delivery van or donate it to a non-profit organization that delivers meals to the elderly. In estimating the incremental free cash flows for this decision, for which of the following should we adjust? Do not include factors that are only indirectly used to calculate other factors – only choose factors that should be directly considered, for their own sake, in the cash flow calculations (rather than in the calculation of another factor). For this particular problem, circle the letters of all of the answers that apply (i.e., you may choose to circle more than just one answer). a. The cost of the new van. b. The interest expense on the loan to buy the new van. c. Any reputation effect/goodwill resulting from donating the van to a worthy charity. d. The price that the company originally paid for the old van. e. The book value of the old van. f. The tax effect of donating the old van. g. The current market value of the old van. h. The tax effect of selling the old van.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company has just purchased a new delivery van. Now it is trying to decide whether to sell its old delivery van or donate it to a non-profit organization that delivers meals to the elderly. In estimating the incremental free cash flows for this decision, for which of the following should we adjust? Do not include factors that are only indirectly used to calculate other factors – only choose factors that should be directly considered, for their own sake, in the cash flow calculations (rather than in the calculation of another factor). For this particular problem, circle the letters of all of the answers that apply (i.e., you may choose to circle more than just one answer).
a. The cost of the new van.
b. The interest expense on the loan to buy the new van.
c. Any reputation effect/goodwill resulting from donating the van to a worthy charity.
d. The price that the company originally paid for the old van.
e. The book value of the old van.
f. The tax effect of donating the old van.
g. The current market value of the old van.
h. The tax effect of selling the old van.
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