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Present Values 3
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Lecture1.1
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Lecture1.2
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Lecture1.3
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NPV vs. IRR 4
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Lecture2.1
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Lecture2.2
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Lecture2.3
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Lecture2.4
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Other Profit Measures 4
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Lecture3.1
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Lecture3.2
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Lecture3.3
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Lecture3.4
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Depreciation 4
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Lecture4.1
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Lecture4.2
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Lecture4.3
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Lecture4.4
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Cash Flow Challenges 9
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Lecture5.1
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Lecture5.2
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Lecture5.3
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Lecture5.4
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Lecture5.5
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Lecture5.6
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Lecture5.7
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Lecture5.8
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Lecture5.9
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Capital Asset Pricing Model 3
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Lecture6.1
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Lecture6.2
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Lecture6.3
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Risky Debt 3
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Lecture7.1
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Lecture7.2
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Lecture7.3
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Unlevering Equity 3
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Lecture8.1
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Lecture8.2
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Lecture8.3
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Weighted Average Cost of Capital 4
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Lecture9.1
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Lecture9.2
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Lecture9.3
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Lecture9.4
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Debt Effect Analysis 2
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Lecture10.1
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Lecture10.2
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WACC Challenge 2
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Lecture11.1
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Lecture11.2
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Relative Valuation 4
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Lecture12.1
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Lecture12.2
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Lecture12.3
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Lecture12.4
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Forward Contract Valuation 3
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Lecture13.1
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Lecture13.2
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Lecture13.3
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Solution 6
Your new inputs are as so:
Solution 6
NWC = [Cashflow(-50000,0,.05),Cashflow(50000,5,.05)]
print(NPV(NWC))
print(NPV(NCS)+NPV2(OCF,.2)+NPV(taxShield(100000,0,5,.2,.05))+NPV(NWC))
Notice net capital spending now has an inflow at period 5 of $50,000 and the tax shield now has 50,000 as the salvage value input instead of 0.
You should be getting a value of $92,872.73, your value goes up because now you can make $50,000 at the end of the period. Notice, though, that your tax shield will be less because depreciation charges are half of what they were before.
Challenge
Finally, let’s see what happens if you sell the equipment for $60,000 instead of $50,000.
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Solution 7