What are the periodic cash flows associated with the project?

Q: Identify the cash flow series associated with production or service over thelife of the asset?

A: Definition: Cash inflows: The amount of cash received by a company from the operating, investing,…

Q: what is the projected cash flow statement?

A: Cash flow statement: The cash flow statement shows only inflows and outflows of cash. It does not…

Q: What is alternative cash flow measures?

A: Cash flow refers to the amount of cash that moves in and out of the business because of its…

Q: Explain what net operating working capital is, and explain how changes in that quantity can affect…

A: Net operating working capital is defined as excess of current operating assets over current…

Q: Describe about the cash flow risk.

A: Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a…

Q: How is the value of an asset determined by predicted future cash flows?

A: The Answer

Q: How to analyze capital budgeting decisions? Which measures are important and why?

A: Capital Budgeting process involve analyzing the cash in flow and outflow of a project, to determine…

Q: what is the importance of cash flow management when evaluating proposals for capital expenditure?

A: The cash flow management is related to management of inflows of cash and outflows of cash with…

Q: What is nonnormal cash flow projects?

A: Introduction:   Cash flow is the cash or cash equivalent transferred from in and out of business.

Q: Which of the following items are required to analyze a capital expenditure? (Select all that apply.)…

A: To analyze a capital expenditure, the primary focus is to understand the cost of the expenditure and…

Q: What is the maturity period required for an investment to qualify under the definitions of a cash…

A: Cash and cash equivalents correspond to just the line item on the balance sheet that lists the value…

Q: Where is the short term investment shown in the Cash flow statement?

A: A short-term investment: It also known as a temporary investment or marketable security. It is a…

Q: Describe the process of developing cash flows for a project?

A: The project cash flow is required for the computation of NPV which further helps in analyzing the…

Q: How is a profitability index figured as it relates to capital budgeting and annuities?

A: Capital Budgeting is a decision making process. With different investment options available, the…

Q: What are the interest formulas for single cash flows?

A: Present Value: The value of today’s amount to be paid or received in the future at a compound…

Q: Describe the annual cash flow analysis, which presents measures of investment worth based on yield?

A: The question is based on the concept of cash flow and its analysis in terms of discounted value of…

Q: A project can have as many different internal rates of return as it has: O changes in the sign of…

A: The internal rate of return (IRR) is used to measure the profitability of investments. It is the…

Q: What are the effects of Borrowing on Project Cash Flows?

A: Cash flows are the cash generated from the operation of the business organisation. In other words,…

Q: What is capital budgeting? Explain its needs and importance.

A: Capital budgeting is the process of analyzing and selecting long-term investment projects that…

Q: What does effective capital budgeting require?

A: Capital budgeting is the process of evaluating large-scale investments or expenditures. The…

Q: Are the revenues from the goods and services produced in the new facility, the expected future cash…

A: The question is based on the concept of calculation and components of cash inflows from new long…

Q: Should financing costs be included as an incremental cash flow in capital budgeting analysis?…

A: Financing ost will be reflective of all such cost which are incurred due to financing of a…

Q: What is the procedure of developing Project Cash Flow Statements?

A: Cash flow is the amount of liquid cash that flows in and out of the company in a particular…

Q: How can we determine the project cash flows in the absence of inflation?

A: Project Cash Flows are the Net cash flows of the project i.e. Sources of cash less uses of cash. The…

Net Present Value

Net present value is the most important concept of finance. It is used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. The difference between the present value of cash inflow and cash outflow is termed as net present value (NPV). It is used for capital budgeting and investment planning. It is also used to compare similar investment alternatives.

Investment Decision

The term investment refers to allocating money with the intention of getting positive returns in the future period. For example, an asset would be acquired with the motive of generating income by selling the asset when there is a price increase.  

Factors That Complicate Capital Investment Analysis

Capital investment analysis is a way of the budgeting process that companies and the government use to evaluate the profitability of the investment that has been done for the long term. This can include the evaluation of fixed assets such as machinery, equipment, etc. 

Capital Budgeting

Capital budgeting is a decision-making process whereby long-term investments is evaluated and selected based on whether such investment is worth pursuing in future or not. It plays an important role in financial decision-making as it impacts the profitability of the business in the long term. The benefits of capital budgeting may be in the form of increased revenue or reduction in cost. The capital budgeting decisions include replacing or rebuilding of the fixed assets, addition of an asset. These long-term investment decisions involve a large number of funds and are irreversible because the market for the second-hand asset may be difficult to find and will have an effect over long-time spam. A right decision can yield favorable returns on the other hand a wrong decision may have an effect on the sustainability of the firm. Capital budgeting helps businesses to understand risks that are involved in undertaking capital investment. It also enables them to choose the option which generates the best return by applying the various capital budgeting techniques.