Preferably, a financial analyst estimates cash flows for a project as
a. accounting profits after taxes.
b. cash flows before taxes.
c. accounting profits before taxes.
d. cash flows after taxes.
Option D is correct
Cash flows after taxes
Operating cash flow is used in financial analysis
Preferably, a financial analyst estimates cash flows for a project as a. accounting profits after taxes....
Preferably, a financial analyst estimates cash flows for a project as Pre-tax accounting profit After-tax cash flow Pre-tax cash flow After-tax accounting profit
When the financial executive estimates the cash flows of a project for a capital budgeting analysis, there is a degree of uncertainty surrounding the estimates. In this context, which of the following statements is true? a) Recognizing the uncertainty surrounding the estimates, the financial executive should use the most pessimistic figures. b) Since financial executives cannot influence certain external factors, they do not have to understand how these external factors can affect the estimates. c) One way the financial executive...
The value of a proposed capital budgeting project depends upon the a. Total cash flows produced b. Incremental cash flows produced c. Accounting profits produced d. Increase in total sales produced
Question 7 (10 marks] 7.1. 7.2. Operating cash flows, rather than accounting profits, are used in project analysis. What is the basis for this emphasis on cash flows as opposed to net income? (4) Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward? (2) Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. 7.3.
A new financial analyst at Company X does the following NPV analysis. Year After-tax Cash flows PV @ 12% 0 -100000 -100,000.00 1 30000 26,978.42 2 30000 24,261.17 3 35000 25,453.86 4 35000 22,890.16 5 35000 20,584.68 6 35000 18,511.40 He reports an NPV of $38,679.69, an IRR of 10.93% and a payback period of 5.02 years. Check these results and correct his analysis if necessary.
Estimates of the current worth of anticipated cash flows resulting from a project is known as ___________. Project Budget Project Scope Net Present Value Payback Period
A project is expected to generate the following cash flows: Year Project after-tax cash flows -$350 150 -25 300 The project's cost of capital is 10%, calculate this project’s MIRR.
(Calculating project cash flows and NPV) The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered will result in an increase in earnings before interest and taxes of $ 33000 per year, it has a purchase price of $115 000, and it would cost an additional $6 000 after tax to correctly install this machine. In addition, to properly operate this machine, inventory must be increased by $5 500. This machine has...
Why is Operating Cash Flows, rather than accounting profits (Net Income), the better basis for emphasis on cash flows?
6. Use the following after-tax cash flows for project A and B to answer the following question: (Numbers in parentheses are negative cash flows). These two projects are independent. Year Cash Flow of A Cash Flow of B 0 ($2,400) ($4,500) 1 $999 $800 2 $950 $950 3 ( $150) $950 4 $910 $800 5 $990 $900 6 ( $500) $1980 What is the approximate IRR of project A if the required rate of...