Question

Which of the following cash flows are not considered in the calculation of the annual cash-flow for a capital investment proposal?
Taxes

Incremental costs

Change in revenue

Depreciation in the project

Proceeds from selling an old asset which is being replaced by a new asset

Answer 1

Answer:

Proceeds from selling an old asset which is being replaced by a new asset

Explanation:

Annual cash flow is the term that describes the measure of cash coming and going out in a business, it thus, convert and compare the annual cash amount from previous year, against the current year.

When measuring annual cash flow for capital investment proposal, the following will be considered:

1.  Taxes: the amount of taxes that will be paid during the year.

2.  Incremental cost that will be accrued over the year period or duration

3.  Change in revenue

4.  Depreciation in the value of the project.

However, in this case, Proceeds from selling an old asset which is being replaced by a new asset does not impact the cash flow as the transaction takes place in exchange for an asset