Chapter+09 - Chapter 9 10/3/2011 Incremental Cash Flows The...

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Chapter 9 10/3/2011 1 Incremental Cash Flows • The incremental cash flows for project evaluation consist of any and all changes in the firm’s future cash flows that are a direct consequence of taking the project. • Incremental cash flows are what are discounted to make the decisions and descriptions for the NPV, IRR, and payback. • With versus without. Sunk Costs • A cost that has already been incurred (or cannot now be avoided) and cannot be recovered and therefore should not be considered in an investment decision. Driving to Rexburg • Manhattan property • Marketing studies Opportunity Costs • The most valuable alternative that is given up if a particular investment is undertaken. • Disney and strawberries • Land • Market values not book values Side Effects • Any and all • Erosion, cannibalization, synergy Net Working Capital • Cash counts, not profit • Receivables and Inventory • Payables • An increase in the other parts of net working capital is a reduction in cash. • It is the change that matters.
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This note was uploaded on 11/04/2011 for the course FIN 101 taught by Professor Staff during the Fall '11 term at Texas State.

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Chapter+09 - Chapter 9 10/3/2011 Incremental Cash Flows The...

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