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Bài giảng Management theory and practice Financial: Chapter 11

Cùng tìm hiểu Estimating cash flows; Capital budgeting with risk issues; Project risk analysis; Managing risk with staged-decision được trình bày cụ thể trong "Bài giảng Management theory and practice Financial: Chapter 11". Mời các bạn cùng tìm hiểu và tham khảo nội dung thông tin tài liệu. | Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-3 Corporate Valuation, Cash Flows, and Risk Analysis Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-4 Topics in Chapter Estimating cash flows: Relevant cash flows Capital cost allowance Working capital treatment Inflation Capital budgeting with risk issues Project risk analysis Managing risk with staged-decision Estimating Cash Flows The most important and also most difficult step in analyzing a capital budgeting project is the project cash-flow estimation. Project cash flows mean actual cash to be received or paid. Credit policy is invariably ignored in the capital budgeting process. Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-5 Relevant Cash Flows Additional free cash flow that firms can expect if they implement the project. Only incremental amounts are considered. FCF/NCF = investment outlay CF + operating CF + net operating working capital CF + salvage CF Copyright © 2011 by | Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-3 Corporate Valuation, Cash Flows, and Risk Analysis Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-4 Topics in Chapter Estimating cash flows: Relevant cash flows Capital cost allowance Working capital treatment Inflation Capital budgeting with risk issues Project risk analysis Managing risk with staged-decision Estimating Cash Flows The most important and also most difficult step in analyzing a capital budgeting project is the project cash-flow estimation. Project cash flows mean actual cash to be received or paid. Credit policy is invariably ignored in the capital budgeting process. Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-5 Relevant Cash Flows Additional free cash flow that firms can expect if they implement the project. Only incremental amounts are considered. FCF/NCF = investment outlay CF + operating CF + net operating working capital CF + salvage CF Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-6 Capital Cost Allowance (CCA) Income Tax Act (ITA) does allow firms to deduct CCA, which is similar to amortization for book purposes, in calculating taxable income. CCA calculation is similar to declining balance amortization for most assets. A non-cash expenses involving no actual cash outflow. Have deep cash flow implications. Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-7 CCA (Cont’d) Apply to tangible assets based on CCA class specification. Pool concept, not concerned with the economic life and salvage value of any individual asset. Un-depreciated capital cost (UCC) is the amount remaining to be claimed (i.e. book value) as CCA for an asset class. UCC ≠ market value in general. Copyright © 2011 by Nelson Education Ltd. All rights reserved. 11-8 Effect of CCA Depreciation on Income and Cash Flow Company A Company B Sales $100,000 $100,000 Cost of good sold 30,000 30,000 Gross profit $70,000 $70,000 Operating .