HTA 602 Lecture Notes - Lecture 10: Operating Cash Flow, Capital Cost Allowance, Tax Rate

• School: Ryerson University
• Department: Hospitality and Tourism Management
• Course: HTA 602
• Professor: Bernard Mc Evoy

Document Summary

Understand how to determine the relevant cash flows for various types of proposed investments. Be able to compute the cca tax shield. Understand the various methods for computing operating cash flow. Understand how to analyze different capital budgeting decisions. The cash flows that should be included in a capital budgeting analysis are those that will only occur (or not occur) if the project is accepted. These cash flows are called incremental cash flows. The stand-alone principle allows us to analyze each project in isolation from the firm simply, by focusing on incremental cash flows. You should alwa(cid:455)s ask (cid:455)ou(cid:396)self (cid:862)will this (cid:272)ash flow o(cid:272)(cid:272)u(cid:396) (cid:894)o(cid:396) (cid:374)ot o(cid:272)(cid:272)u(cid:396)(cid:895) only if we a(cid:272)(cid:272)ept the proje(cid:272)t? (cid:863) If the a(cid:374)swe(cid:396) is (cid:862)(cid:455)es(cid:863), it should (cid:271)e i(cid:374)(cid:272)luded i(cid:374) the a(cid:374)al(cid:455)sis (cid:271)e(cid:272)ause it is i(cid:374)(cid:272)(cid:396)e(cid:373)e(cid:374)tal. If the a(cid:374)swe(cid:396) is (cid:862)(cid:374)o(cid:863), it should (cid:374)ot (cid:271)e i(cid:374)(cid:272)luded i(cid:374) the a(cid:374)al(cid:455)sis (cid:271)e(cid:272)ause it will o(cid:272)(cid:272)u(cid:396) a(cid:374)(cid:455)wa(cid:455)