2007 Chapter 10-1

2007 Chapter 10-1 - 1 Project Cash Flows Engineering...

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Unformatted text preview: 1 Project Cash Flows Engineering Economics & Mgmt CIVI 322 Chapter 10 2 Outline • Types of Projects • Incremental Cash Flows • Cash Flow Elements • Developing Cash Flow Statements • Generalized Cash Flow Approach 3 Project Types Expansion project Product-improv projects Cost-improv projects Profit-adding Projects Replacement projects Necessity projects Profit-maintaining projects PRO JECT S 4 Elements of Cash Flow (Incremental) • Investment in Assets • Salvage value • Working Capital Investment • Working Capital Release • Cash Revenues/Savings • Manufacturing, Operating & Maintenance Costs • Leasing Expenses • Interest and Repayment of Debt • Income Taxes and Tax Credits 5 Cash Flows Cash Outflows Cash Inflows Initial Investment Incremental Revenue Working Capital Inv. Cost Savings Repairs & Maint. Allowed Tax Credits Inc. Man. & Op Costs Salvage Value Interest and Loan Pmt Working Cap Release Income Taxes ST & LT Loans 6 1 2 3 N Cash Flow Elements Borrowed Funds Investment in Assets and Working Capital Operating Cash Inflows Operating Cash Outflows Loan Repayment Salvage Value Recovery of Working Capital Net cash flow = Cash inflow - cash outflow 7 Classification of Cash Flows • Operating Activities – Cash effects of transactions on Net Income • Investing Activities – Capital investment – Salvage value – Working capital investment or recovery • Financing Activities – Debt and repayment of principal 8 Operating Activities • Sales revenue (inflow) • Cost savings (inflow) • Manufacturing expenses (outflow) • O & M cost (outflow) • Interest payments (outflow) • Lease expenses (outflow) • Income taxes (outflow) 9 Investing Activities • Capital investment (outflow) • Salvage value (inflow) • Working capital (outflow) • Working capital recovery (inflow) • Gains taxes (outflow) 10 Financing Activities • Borrowed Amount (inflow) • Principal repayments (outflow) 11...
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2007 Chapter 10-1 - 1 Project Cash Flows Engineering...

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