FINE 2000 Chapter Notes - Chapter 9: Operating Cash Flow, Cash Flow, Real Interest Rate
6 Nov 2014
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Chapter 9: using discounted cash flow analysis to make investment decisions. Ensure you"re discounting cash flows not accounting profit. To convert from accounting profit to cash flows: (sales investment in a/r = cash flow when sale is made; sales. + recovery of a/r = cash flow when money is received) Projects are financially attractive because of the cash they generate for distribution to shareholders or for reinvestment in the firm. = cash flow with project cash flow w/out project: *note: allocated overhead cost a project may generate extra overhead cost but it might not. Have to be careful about that the accountant"s allocation of overhead cost is incremental and incurred because the project was started. If it was going to be incurred anyway, it shouldn"t be considered. : ex. cannibalization of current sales with new product launch, new. Indirect effects product that helps increase sales in other areas another.
