Good morning Professor,
I had a question about point 4 - CAPEX of the case study assignment.
From the exercise sets, I'm used to calculating the investing CFs as follows: CAPEX + Investment in NWC + Salvage Value + Opportunity Cost. The problem is that online, I can't find the actual Salvage Value, but just the Net Business Purchase and Net Investment Purchase.
Another problem is that when I add up: CAPEX + Investment in NWC + Net Business Purchase + Net Investment Purchase, I get a different number from the ACTUAL Investing CFs reported in the official company's statements. The way the company has calculated the Investing CFs in the statements is the following: CAPEX + Net Business Purchase and Sale + Net Investment Purchase and Sale + Net Other Investing Changes.
My question is: Since I have already calculated the Investment in NWC from the Working Capital, should I use the formula we use in the exercise sets (CAPEX + INVESTMENT IN NWC) or should I use the "formula" used by the company (CAPEX + Net Business Purchase and Sale + Net Investment Purchase and Sale + Net Other Investing Changes) to get the actual number reported?
I know this type of dilemma is part of the challenge, but I have done extensive research, and for example, to calculate the potential Salvage Value, I find it quite impossible to actually find the precise asset sold, the actual sale price, the precise amount of depreciation incurred, and its original book value, let alone trying to estimate such numbers for the 2025-2027 period.
I hope I explained myself clearly.
Best Regards,
Pietro Loser