The additional profit on top of the salvage value is $10,000. This extra value, however, is taxed. We will add it separately because of this, but in reality it would be under an inflow in net capital spending.

Solution 7

NCS = [Cashflow(-100000,0,.05),Cashflow(50000,5,.05)]
OCF = [Cashflow(45000,1,.05),Cashflow(45000,2,.05),Cashflow(45000,3,.05),Cashflow(45000,4,.05),Cashflow(45000,5,.05)]
NWC = [Cashflow(-50000,0,.05),Cashflow(50000,5,.05)]
Shield = taxShield(100000,50000,5,.2,.05)
print(NPV(NCS)+NPV2(OCF,.2)+NPV(Shield)+NPV(NWC)+NPV2([Cashflow(10000,5,.05)],.2))

All we need to do is add the additional profit on as a taxed cash flow through our NPV2 function.

Source Code