CFFM6_ch 12_slides

CFFM6_ch 12_slides - Cash Flow Estimation and Risk Analysis Chapter 12 Relevant Cash Flows Incorporating Inflation Types of Risk Risk Analysis 12-1

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Unformatted text preview: Cash Flow Estimation and Risk Analysis Chapter 12 Relevant Cash Flows Incorporating Inflation Types of Risk Risk Analysis 12-1 Determining Project Value Estimate relevant cash flows Calculating annual operating cash flows. Identifying changes in working capital. Calculating terminal cash flows: after-tax salvage value and return of NWC. 12-2 Initial OCF 1 OCF 2 OCF 3 OCF 4 Costs + Terminal CFs NCF NCF 1 NCF 2 NCF 3 NCF 4 1 2 3 4 Initial Year Net Cash Flow Find ∆ NWC. Combine ∆ NWC with initial costs. Equipment Installation ∆ NWC Net CF 12-3 Determining Annual Depreciation Expense We would use MACRS under most circumstances Due to the MACRS ½-year convention, a 3-year asset is depreciated over 4 years. 12-4 Terminal Cash Flow Q. How is NWC recovered? Q. Is there always a tax on SV? Q. Is the tax on SV ever a positive cash flow? 12-5 Recovery of NWC Salvage Value Tax of SV Terminal CF Should financing effects be included in cash flows?...
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This note was uploaded on 02/22/2012 for the course BUAD 3040 taught by Professor Morris during the Spring '08 term at Toledo.

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CFFM6_ch 12_slides - Cash Flow Estimation and Risk Analysis Chapter 12 Relevant Cash Flows Incorporating Inflation Types of Risk Risk Analysis 12-1

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