Professional Documents
Culture Documents
Chapter 8
Chapter 8
Capital
Budgeting
Cash Flows
1. Proposal Generation
Our Focus is
2. Review and Analysis
on Step 2 and 3
3. Decision Making
4. Implementation
5. Follow-up
Copyright © 2009 Pearson Prentice Hall. All rights reserved. 8-6
Basic Terminology: Independent versus
Mutually Exclusive Projects
• Sale of the Asset for More Than Its Book Value but
Less than Its Purchase Price
If Hudson sells the old asset for $30,000 which is less than
its book value of $48,000, it experiences a loss of $18,000
($48,000 - $30,000). If this is a depreciable asset used in
the business, the loss may be used to offset ordinary
operating income. If it is not depreciable or used in the
business, the loss can only e used to offset capital gains.