Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › MIRR PV of cash flow from investment phase
- This topic has 4 replies, 2 voices, and was last updated 12 years ago by firedolphin.
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- November 21, 2012 at 12:51 am #55542
Hi, I believe everyone is familiar with the MIRR formulae, just there is one thing I am not sure, the PV of the cash flow from investment phase, what exactly should be included in calculating that?
let me use a example: a project last for 5 years
a) . initial investment of $10000 of machinery at year 0
b) . additional investment $ 6000 of machinery at year 2
c) . scrap value of machinery is $1000 at year 5
d) . capital allowance for year1- 5 are: ($5000),( $4000) ,($3000) ,($2000) ,($1000).
e) . additional working capital for year 0-2 are: $1000,$500,$500
f ) . working capital recovery at year 5 ( $2000)
g) . tax payable for year 1-5 are : $2500,$3000,$3500,$4000,$4500I know item (a) should definitely be included in PV of cash flow from initial investment phase, could anyone please shed some light on whether any of the other 6 items (b)-(g) should be included as well?
I made all these numbers up myself, so sorry if any of them doesn’t make sense.
Thank you in advance!!
Jason
November 21, 2012 at 4:43 am #108073AnonymousInactive- Topics: 0
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Any type of investment expenditure is added…In case of your example except for scrap value and the working capital recovery and capital allowance other things are included in investment phase……as capital allowance provide tax relief at tax rate it should be included in return phase.
November 22, 2012 at 10:44 pm #108074thanks, so basically the initial investment and additional working capital should be included.how about tax paid? should they be added ?
November 24, 2012 at 3:18 am #108075AnonymousInactive- Topics: 0
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yes tax paid in included too
November 26, 2012 at 2:27 am #108076Thank you very much~
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