FACC 300 Lecture Notes - Lecture 6: Cash Flow, Deferred Income, Opportunity Cost

• School: McGill University
• Department: Faculty Course
• Course: FACC 300
• Professor: Raad Jassim

Document Summary

Opportunity cost of money (alternate consideration: the selection of projects is based on the objective of maximisation of investor wealth. Accumulate as much wealth as possible, as rapidly as possible, using the least amount of capital as possible, obtained from the lowest cost sources as possible. Discounted cash flow (dcf) methods are evaluation techniques that recognize these aspects. However: they cannot deal with non-monetary aspects, the emphasis placed on short-term costs and/or benefitsthis presents difficulties when dealing with long-term issues such as conservation, pollution and education. Dcf evaluation techniques are based on the concept of cash flow. Cf = inflows of cash - outflows of cash (per period of time) Inflow (benefits: sales (or reduction in costs, i. e. benefits, disposal of assets. Outflows (costs: capital expenditures, operating expenses, tax payments, rehabilitation expenditures. Determination of cash flow in a profit-based tax system. = net income before allowances and taxes (nibat) Cf = revenue - operating expenses - taxes - capital expenditure.