Textbook Notes (367,988)
Canada (161,542)
Finance (362)
FIN 300 (120)
Chapter

FIN30 ch 10

5 Pages
126 Views
Unlock Document

Department
Finance
Course
FIN 300
Professor
Cynthia Holmes
Semester
Winter

Description
Chapter 10Making capital investment decisions Relevant Cash Flows 101incremental cash flows changes to a firms future cash flows that are a direct consequence of taking the projectstandalone principle allows us to analyze each project in isolation from the firm simply by focusing on incremental cash flows o Its like the project is its own minifirm with its own revenues costs assets and liabilities o project is analyzed on its own merits Asking the Right Questionask yourself Will this cash flow occur or not occur ONLY if we accept the project o If the answer is yes it should be included in the analysis because it is incremental o If the answer is no it should not be included in the analysis because it will occur anyway o If the answer is part of it then we should include the part that occurs or does not occur because of the project EX Mad Mexican case Culinary student at George Brown started selling fresh chips and salsa from a table at St Lawrence market under the brand name Mad MexicanDid preparation at home himself Opened a restaurant called Frida used that kitchen for the Mad Mexican production work In 2010 he opened a new production kitchen for Mad Mexican6 employeesProducts carried in about 50 Torontoarea gourmet grocers If we are analyzing the decision about whether to open a production kitchen then which cash flows are relevant to the analysis On the revenue side the choices would be All Mad MexicanFrida revenues All Mad Mexican sales revenues only The increase in sales associated with the new kitchen only not ALL Mad Mexican salesOn the cost side which should be includedThe onetime upfront capital costs associated with setting up the new kitchen The annual rent for the new kitchen space The total cost the ingredients for all Mad Mexican sales The cost of the ingredients for the portion of sales associated with the new kitchen
More Less

Related notes for FIN 300

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit