Chap009.ppt - Cash Flows Ct C1 C2 NPV C0 1 2 t(1 r(1 r(1 r...

Info icon This preview shows pages 1–6. Sign up to view the full content.

Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

9- 2 Cash Flows Chapter 8 introduced valuation techniques based on discounted cash flows. This chapter develops criteria for properly identifying and calculating cash flows. 1 2 0 1 2 ... (1 ) (1 ) (1 ) t t C C C NPV C r r r
Image of page 2
9- 3 Identifying Cash Flows: Cash Flow vs. Accounting Income Discount actual cash flows, not necessarily net income. Using accounting income, rather than cash flow, could lead to erroneous decisions.
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

9- 4 Incremental Cash Flows Discount Incremental Cash Flows Include All Indirect Effects Forget Sunk Costs Include Opportunity Costs Recognize the Investment in Working Capital Beware of Allocated Overhead Costs Remember Shutdown Cash Flows Incremental Cash Flow Cash Flow with Project Cash Flow without Project = -
Image of page 4
9- 5 Inflation and Discounting Cash Flows Discounting Rule: Discounting Rule: Real cash flows must be discounted at a real discount rate, nominal cash flows at a nominal rate.
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 6
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '16
  • Stone Wong

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern