Chapter+12cf5-25财务管理.pptVIP

CHAPTER 12Cash Flow Estimation and Risk Analysis Relevant cash flows Accounting Income and CF Operating CF Net CF Incremental Cash Flows Sunk Costs A cash outlay that has already been incurred and which cannot be recovered regardless of whether the project is accepted or rejected. Opportunity Costs The return on the best alternative use of an asset Externalities Effects of a project on cash flows in other parts of the firm. Accounting Income vs. Cash FlowSales $100,000, Costs except Depreciation $50,000 Depreciation $30,000 Accounting Income (Profits) Sales $100,000 Costs ex. Dep. - $50,000 Depreciation - $30,000 -------------------------------------- Operating Income $20,000 Taxes (40%) - $8,000 --------------------------------------- Net Income $12,000 Accounting Income vs. Cash Flow(Continued) Cash Flows Sales $100,000 Costs ex. Dep. - $50,000 -------------------------------------- Gross Cash Flow $50,000 Taxes - $8,000 --------------------------------------- Net Cash Flow $42,000 Net Cash Flow = Net Income + Depreciation = $42,000 Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $50,000 annually. The machine falls into the MACRS 3-yr class, (33%, 45%, 15%, and 7%) and it would be sold at the end of its 3-year operating life for $60,000. The machine would require an increase in net working capital by $8,000 (spare parts inventory) when the machine is installed, but required working capital will return to the original level when the machine is sold after 3 years. Marss marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature. If the machine’s price is $140,000, and it would cost another $30,000 to modify the machine, what is the projects NPV? Proposed Project Proposed Project Total depreciable cost Equipment: $140,000 Modification: $30,000 Changes in working capital Inventories will rise by $8,000 Effect on operations Saving $50