FIN20150 Lecture Notes - Lecture 16: Financial Statement, Income Statement, Die Tageszeitung
Document Summary
Determine relevant cash flows (incremental cash flows) o. Relevant if change in firms overall future cash flow comes about as result of decision to take project. Stand alone principle- the assumption that evaluation of a project may be based on the project"s incremental cash flows. Sunk cost- already paid or incurred the liability to pay. Cant be changed by decision to accept (must pay no matter o. Not relevant o o o o o o o o. Side effects- ex) erosion- cash flows from a new project that come as expense from existing projects. Relevant only when sales would not otherwise be lost. Net working capital- need some cash to pay for expenses that arise. Like a loan bc eventually firm recovers it. Aftertax cash flows- diff from net income o o. Pro forma financial statements (projected) o spending, changes in net working capital. Cash flow from assets has 3 components: operating cash flow, capital.
