ch.12 notes - CHAPTER 12 Cash Flow Estimation and Risk...

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CHAPTER 12 Cash Flow Estimation and Risk Analysis FIN 300 E.Johnson
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Cash Flow Estimation. Example 1: You work for Alpha Inc., and you must estimate the Year 1 operating net cash flow for a proposed project with the following data. What is the Year 1 operating cash flow? Sales $11,000= Revenues Depreciation $4,000 Other operating costs $6,000 Tax rate 35% Year 1 Revenues ?11,000 - Op Costs ?6,000 - Depr’n Expense ?4,0000 Operating Income (BT) ?1,000 - Tax (35%) ?350 Operating Income (AT) ?650 + Depr’n Expense ?4000 Operating CF 4,650 (Thousands of dollars)
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Example 2 : As a member of Gamma Corporation's financial staff, you must estimate the Year 1 operating net cash flow for a proposed project with the following data. What is the Year 1 operating cash flow? Tax is 35% Sales $33,000 Depreciation $10,000 Other operating costs $17,000 Interest expense $4,000 Year 1 Revenues 33,000 - Op Costs 17,000 - Depr’n Expense 10,000 Operating Income (BT) 6,000 - Tax (35%) 2,100 Operating Income (AT) 3,900 + Depr’n Expense 10,000 Operating CF 13,900 (Thousands of dollars)
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This note was uploaded on 05/10/2008 for the course FIN 300 taught by Professor Cindychen during the Spring '07 term at CSU Long Beach.

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ch.12 notes - CHAPTER 12 Cash Flow Estimation and Risk...

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