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2013 1 9 6.5 Some Special Cases of Discounted Cash Flow Analysis 189 Evaluating Cost Cutting Proposals 189 Setting the Bid Price 191 Investments of Unequal Lives The Equivalent Annual Cost Method 193 Summary and Conclusions 195 Concept Questions 195 Questions and Problems 197 Excel Master It 205 Mini Cases Bethesda Mining Company 206
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The following Mini Case on Bethesda Mining Company was taken from the text corporate finance 2010 P 203 204 In order to determine if Bethesda Mine should open a thorough analysis of the payback period profitability index average accounting return net present value internal rate of return and the modified internal rate of return have
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2016 10 7 The last cash flow we need to account for is the salvage value The fact that the company is keeping the equipment for another project is irrelevant The aftertax salvage value of the equipment should be used as the cost of equipment for the new project In other words the equipment could be sold after this project Keeping the equipment is an opportunity cost associated with that project.
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