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I think i have made a discovery
If I do an NPV instead of a cash flow to equity i get the same result but add in the value of the building as if you sold it?????
I don’t know what you mean.
The question asks for the NPV (the value of the project), so why are you interested in the cash flows to equity?
Oh …right…The way they lay it out in the answer looks more like a cash flow with depreciation
But NPV’s are always looking at the cash flows. Depreciation has been subtracted, then the tax calculated, and then the depreciation has been added back because it is not a cash flow.
This is one of the normal two standard ways of dealing with it. The alternative is to calculate the tax on the flows without depreciation and then separately calculate the tax saving on the depreciation. Either way is fine and gives the same answer.Have you watched my lectures working through this question?
I did watch it. But you have to understand fully otherwise you forget. If you just watch and it is mechanical then it has to be studied, if you understand you know
thanks
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