Test 3 Notes - 1 Set NPVA = NPVB 2-500 325(1 r 3 Put...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1) Set NPV A = NPV B 2) -500 + 325?(1+r) + … 3) Put everything on the right hand side a. 0 = (500-400) + (325-325)/(1+r) … b. (net cash flows at each point in time) 4) Calculator – enter net cash flow as normal cash flow and solve for IRR Common Types of Cash Flows Sunk costs (don’t include – not incremental) –costs that have accrued in the past Opportunity costs – costs of lost options Side effects o Positive side effects – benefits to other projects o Negative side effects – costs to other projects Changes in net working capital – the change in current assets minus the change in current liabilities – the cash you put into a business to smooth over your current accounts Financing (don’t include – not incremental) Taxes Pro Forma Statements and Cash Flow Capital budgeting relies on pro forma accounting statements Cash Flow From Assets (CFFA): the total net cash flow per period associated with a project 3 components 1. Operating Cash Flow (OCF): regularly generated cash flows from the ongoing activites of the project. Income statements
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ 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