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Cash Flow Estimation And Risk Analysis, Lecture Notes - Financial Management

Financial Management

Post: October 12th, 2011
Description
Relevant cash flows, Incorporating inflation, Types of risk, Risk Analysis
Relevant cash flows, Incorporating inflation, Types of risk, Risk Analysis
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Contents
CHAPTER 12 Cash Flow Estimation and Risk Analysis     Relevant cash flows Incorporating inflation Types of risk Risk Analysis 12-1 Proposed Project  Total depreciable cost    Equipment: $200,000 Shipping: $10,000 Installation: $30,000 Inventories will rise by $25,000 Accounts payable will rise by $5,000 New sales: 100,000 units/year @ $2/unit Variable cost: 60% of sales 12-2  Changes in working capital    Effect on operations   Proposed Project  Life of the project    Economic life: 4 years Depreciable life: MACRS 3-year class Salvage value: $25,000   Tax rate: 40% WACC: 10% 12-3 Determining project value  Estimate relevant cash flows    Calculating annual operating cash flows. Identifying changes in working capital. Calculating terminal cash flows. 1 OCF1 0 Initial Costs NCF0 2 OCF2 3 OCF3 4 OCF4 + Terminal CFs NCF4 12-4 NCF1 NCF2 NCF3 Initial year net cash flow  Find Δ NOWC. ..

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