Chapter 12

Chapter 12 - 12-1 CHAPTER 12 Cash Flow Estimation and Risk...

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Unformatted text preview: 12-1 CHAPTER 12 Cash Flow Estimation and Risk Analysis Relevant cash flows Incorporating inflation Types of risk Risk Analysis 12-2 Proposed Project Total depreciable cost Equipment: $200,000 Shipping: $10,000 Installation: $30,000 Changes in working capital Inventories will rise by $25,000 Accounts payable will rise by $5,000 Effect on operations New sales: 100,000 units/year @ $2/unit Variable cost: 60% of sales 12-3 Proposed Project Life of the project Economic life: 4 years Depreciable life: MACRS 3-year class Salvage value: $25,000 Tax rate: 40% WACC: 10% 12-4 Determining project value Estimate relevant cash flows Calculating annual operating cash flows. Identifying changes in working capital. Calculating terminal cash flows....
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This note was uploaded on 04/09/2008 for the course BADM 310 taught by Professor O'brien during the Spring '08 term at SD State.

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Chapter 12 - 12-1 CHAPTER 12 Cash Flow Estimation and Risk...

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