(195)---ADDITIONAL ASPECTS OF INCREMENTAL CASH FLOW ANALYSIS

Additional Aspects of Incremental Cash Flow Analysis Sunk costs Sunk costs are outlays incurred in the past. They are the results of past ...

(194)---ADDITIONAL ASPECTS OF INCREMENTAL CASH FLOW ANALYSIS

Additional Aspects of Incremental Cash Flow Analysis Opportunity costs of resources Sometimes a proposed investment project may use the ex...

(193)---ADDITIONAL ASPECTS OF INCREMENTAL CASH FLOW ANALYSIS

Additional Aspects of Incremental Cash Flow Analysis The incremental principle should be carefully used in determining an investment’s cash...

(192)---CASH FLOW ESTIMATES

Cash Flow Estimates for a New Product A new product may be a slight modification of the firm’s existing product or it may be altogether dif...

(191)---COMPONENT OF NET ANNUAL CASH FLOWS

Component of Net Annual Cash Flows Free cash flows In addition to an initial cash outlay, an investment project may require some reinvestm...

(190)---COMPONENT OFNET ANNUAL CASH FLOWS

Component of Net Annual Cash Flows Net working capital In reality, the actual cash receipts and cash payments will differ from revenues (s...

(189)---COMPONENTS OF ANNUAL NET CASH FLOWS

Components of Annual Net Cash Flows Depreciation and taxes The computation of the after-tax cash flows requires a careful treatment of non...

(188)---DEPRECIATION FOR TAX PURPOSES IN CASH FLOW

Depreciation for Tax Purposes in Cash Flow Two most popular methods of charging depreciation are: Straight line method Diminishing balance ...

(187)---TERMINA CASH FLOWS - RELEASE OF NET WORKING CAPITAL

Terminal Cash Flows – Release of Net Working Capital Terminal cash flows will include the release of net working capital. It is reasonable ...

(186)---TAX EFFECTS OF SALVAGE VALUE IN CASH FLOWS

Tax Effects of Salvage Value in Cash Flows A company will incur a book loss if an asset is sold for a price less than the asset’s book (dep...

(185)---COMPONENT OF CASH FLOWS

Component of Cash Flows Terminal cash flows The last or terminal year of an investment may have additional cash flows. Salvage value Salv...

(184)---COMPONENT OF CASH FLOWS

Component of Cash Flows Annual net cash flows An investment is expected to generate annual cash flows from operations after the initial ca...

(183)---COMPONENTS OF CASH FLOWS

Components of Cash Flows A typical investment will have three components of cash flows: Initial investment Annual net cash flows Terminal c...

(182)---INCREMENTAL CASH FLOWS

Incremental Cash Flows It is important to note that all additional cash flows that are directly attributable to the investment project shou...

(181)---ILLUSTRATING THE DIFFERENCES BETWEEN CASH FLOW AND PROFIT

Illustrating the Differences between Cash Flow and Profit Assume that a firm is entirely equity-financed, and it receives its revenues (REV...

(180)---CASH FLOWS FOR INVESTMENT ANALYSIS

Cash Flows and Profit The use of net present value (NPV) rule in investment decisions requires information about cash flows. It is the infl...

(179)---CASH FLOWS FOR INVESTMENT ANALYSIS

Cash Flows for Investment Analysis The first difficult problem to be resolved in applying the NPV rule in practice is: what should be disco...