COM 240 Chapter Notes - Chapter 10: Sunk Costs, Accounts Receivable, Pro Forma
28 Mar 2017
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Com 240 - chapter 10: cash flow estimation for investment decisions: relevant cash ows any changes in the rm"s cf"s, which are a direct consequence of the decision to take on that project. Incremental cash ows: cash ow"s that will only occur (or not occur) if the proposed project is undertaken by the rm. Stand-alone principle: analyze each project by focusing on the difference between a rm"s future cash ows with & without a project. Interested in measuring the cash ows when it actually occurs. Interested in after-tax cash ows (taxes paid = cash out ow) Taxes subtracted are assuming that there is no interest expense. Not relevant - not considered (b) opportunity costs: most valuable alternative that is given up if a particular investment is undertaken. Even if we already own it, it is still a resources that we are using, & not suing for something else.
