IM Chapter 10 Making Capital Investment Decisions

IM Chapter 10 Making Capital Investment Decisions - Chapter...

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Chapter 10 MAKING CAPITAL INVESTMENT DECISIONS SLIDES CHAPTER ORGANIZATION 10.1 Project Cash Flows: A First Look Relevant Cash Flows The Stand-Alone Principle 10.2 Incremental Cash Flows Sunk Costs Opportunity Costs Side Effects Net Working Capital 10.1 Key Concepts and Skills 10.2 Chapter Outline 10.3 Relevant Cash Flows 10.4 Asking the Right Question 10.5 Common Types of Cash Flows 10.6 Pro Forma Statements and Cash Flow 10.7 Table 10.1 Pro Forma Income Statement 10.8 Table 10.2 Projected Capital Requirements 10.9 Table 10.5 Projected Total Cash Flows 10.10 Making The Decision 10.11 More on NWC 10.12 Depreciation 10.13 Computing Depreciation 10.14 After-tax Salvage 10.15 Example: Depreciation and After-tax Salvage 10.16 Example: Straight-line Depreciation 10.17 Example: Three-year MACRS 10.18 Example: Seven-year MACRS 10.19 Example: Replacement Problem 10.20 Replacement Problem – Computing Cash Flows 10.21 Replacement Problem – Pro Forma Income Statements 10.22 Replacement Problem – Incremental Capital Spending 10.23 Replacement Problem – Cash Flow From Assets 10.24 Replacement Problem – Analyzing the Cash Flows 10.25 Other Methods for Computing OCF 10.26 Example: Cost Cutting 10.27 Example: Setting the Bid Price 10.28 Example: Equivalent Annual Cost Analysis 10.29 Quick Quiz
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A-124 CHAPTER 10 Financing Costs Other Issues 10.3 Pro Forma Financial Statements and Project Cash Flows Getting Started: Pro Forma Financial Statements Project Cash Flows Projected Total Cash Flow and Value 10.4 More on Project Cash Flow A Closer Look at Net Working Capital Depreciation An Example: The Majestic Mulch and Compost Company (MMCC) 10.5 Alternative Definitions of Operating Cash Flow The Bottom-Up Approach The Top-Down Approach The Tax Shield Approach Conclusion 10.6 Some Special Cases of Cash Flow Analysis Evaluating Cost-Cutting Proposals Setting the Bid Price Evaluating Equipment Options with Different Lives 10.7 Summary and Conclusions ANNOTATED CHAPTER OUTLINE Slide 10.1 Key Concepts and Skills Slide 10.2 Chapter Outline 10.1. Project Cash Flows: A First Look .A Relevant Cash Flows Relevant cash flows – cash flows that occur (or don’t occur) because a project is undertaken. Cash flows that will occur whether or not we accept a project aren’t relevant. Incremental cash flows – any and all changes in the firm’s future cash flows that are a direct consequence of taking the project Slide 10.3 Relevant Cash Flows Lecture Tip, page 296: It should be strongly emphasized that a project’s cash flows imply changes in future firm cash flows and, therefore, in the
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CHAPTER 10 A-125 firm’s future financial statements. Below are a few examples of possible projects that would cause the student to consider the nature of an incremental item. 1) The development of a plant on land currently owned by the company versus
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IM Chapter 10 Making Capital Investment Decisions - Chapter...

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