ADMN 3200H Lecture Notes - Lecture 7: Operating Cash Flow, Capital Cost Allowance, Cash Flow

• School: Trent University
• Department: Business Administration
• Course: ADMN 3200H
• Professor: Jaime Morales

Document Summary

Understand how to determine the relevant cash flows for a proposed project. Know how to project the cash flows and determine if a project is acceptable. Understand the various methods for computing operating cash flow. Be able to compute the cca tax shield. Understand how to evaluate the equivalent annual cost of a project. 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. Common types of cash flows 10. 2 sunk costs. Opportunity costs side effects: positive side effects, negative side effects changes in net working capital financing costs inflation. Government intervention: capital cost allowance (cca) Typical cash outflows repairs and maintenance initial investment incremental operating costs. Typical cash inflows release of working capital salvage value reduction of costs (saving) incremental revenues. Depreciation itself is a non-cash expense, consequently, it is only relevant because it affects taxes.