Chapter 7 - Chapter 7 Case: Super Project Brief review of...

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Chapter 7 Case: Super Project Brief review of capital budgeting Relation between cash flow and accounting income Important considerations in determining cash flows Incremental cash flows Opportunity costs Taxes Stockholders vs. tax books Working capital and capital budgeting Inflation and capital budgeting Interest rates and inflation Cash flow and inflation Discounting: nominal vs. real Direct cash flow effects of purchase and sale of capital assets Initial outlay Depreciation Resale of used asset Incremental Cash Flows Discount CF not earnings when doing capital budgeting calculations Pitfalls of determining Incremental CF Sunk costs are costs that have already occurred and cannot be recovered Opportunity costs are the costs of the projects that are being foregone by current investments Side effects : erosion or synergy . Erosion is where a new product detracts from sales of another product. Synergy occurs when a new project increases the CF of existing projects Allocated costs are expenditures that benefit several projects
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Chapter 7 - Chapter 7 Case: Super Project Brief review of...

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