11BUSI408 - Capital Investment Decisions

11BUSI408 - Capital Investment Decisions - BUSI 408...

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Chip Snively [email protected] Class 11 BUSI 408 Corporate Finance Spring 2012
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2 Read RWJ6 – Making Capital Inv Decisions We’ll review the Baldwin Company analysis from the text in class Homework RWJ6: Q – 1, 2, 4, 5,7, 9-12 P – 2, 3, 5, 9, 10-13 Group Project Group assignments on Thursday Case introduced on Tuesday next week (due 28th) Next Class
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3 Focus is on “incremental” cash flows, and those that are unique to, caused by, or the result of the project We can ignore things that don’t change as a result (although we may include in comparisons for completeness) Much of the effort in the analysis is focusing on turning accounting data into cash flow information This is the “hard” part Capital Investment Decisions
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4 Incremental Cash Flows Cash flows matter—not accounting earnings Incremental cash flows matter Opportunity costs matter Side effects like cannibalism and erosion matter
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