Topic_10_E1 - Topic 10 Exercise 1 Net Present Value of Cash...

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Topic 10 Exercise 1 Net Present Value of Cash Flows and EVA Analysis Economic Value Added is a tool that has gained widespread acceptance in the corporate world. Many large companies employ Economic Value Added or some related value- based concepts. A recent article in BusinessFinanceMag, “Capitalizing on Economic Value Added,” discusses some of the key concepts related to Economic Value Added and describes some potential benefits of employing such a measure. After reading the article, answer the following questions: 1. What is similar and different about Economic Value Added and the method of measuring cash flows and discounting those cash flows to find the Net Present Value? When estimating the Net Present Value of a potential project, the estimated after- tax cash flows are discounted at the firm’s weighted average cost of capital. The cash flows do not consider the cost of debt financing since the effect of debt financing is considered in the weighted average cost of capital. Only the tax
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This note was uploaded on 09/13/2011 for the course FIN 6301 taught by Professor El-asmawanti during the Fall '09 term at University of Texas at Dallas, Richardson.

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