chapter 5 discounted cash flow valuation：5章现金流量折现法

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1、Chapter12:CashFlowEstimationandRiskAnalysisI.IdentifyingtheRelevantCashFlowsA.Projectcashflowversusaccountingincome-Cashflow¹netincomeorprofit:Projectsshouldbejudgedontheireffectoncashflows.Netincomeconsidersaccountingconventionsandfinancingwhichareunrelatedtoaproject.-Neti

2、ncomecanbeadjustedforthesenon-cashitemstofindthecashflowforafirm.(StatementofCashFlows)B.RulestoFollow:1.Consideronlythecashflowsthatoccurasadirectresultofacceptingtheproject.-Ignoresunkcosts.-Considertheopportunitycostofassetsbeingused.-Includesideeffects(erosion,cannibali

3、sm).2.Forreplacementprojects,focussolelyonthechangesincashflows.3.Ignorefinancing(interestcosts);focusonoperatingcashflows.4.Focusonaftertaxcashflows!5.Includechangesinnetworkingcapitalasacostinanyperiodthatitmayoccur.Addition(reduction)toNWCisanegative(positive)cashflow.C.

4、Thethree-stageapproachtoestimatingprojectcashflows:12Fin335,Chapter12page1.InitialInvestmentOutlay:Usuallynegative-Allinitialcostsnecessarytobringaprojectupandrunning-Anychangesinnetworkingcapital(cash,AR,inventory)-Opportunitycosts(alternativeuseforbuilding,land,etc.)-Ifit

5、’sareplacementproject,youmustconsider:*Salvage(saleofoldasset)*Taxconsequencesofsale(bookvaluevssellingprice)2.Operatingcashflows:Netcashflowsduringproject’slife-Allafter-taxcashflowsfromoperations-Additionalchangesinnetworkingcapital-Ifareplacementproject:annualadjustmentt

6、odepreciation3.Terminalyearcashflows:Finalyearadjustments-Cashflowsotherthanfromoperations-Salvage(saleofnewassetattheendofitslife)-Recoveryandreclamationofproperty(e.g.stripmining)-RecoveryofinvestmentinnetworkingcapitalD.ACloserLookatNetWorkingCapital12Fin335,Chapter12pag

7、eHowChangesinNWCAffectCashFlow:Anincreaseinanycurrentasset(+NWC)isacashoutflow(-Cash)Adecreaseinanycurrentasset(-NWC)isacashinflow(+Cash)Anincreaseinanycurrentliability(-NWC)isacashinflow(+Cash)Adecreaseinanycurrentliability(+NWC)isacashoutflow(-Cash)Cashoutflow(-cash)Cashi

8、nflow(+cash)+Inventory-Inventory+AccountsReceivable(AR)-AR+Prepaidexpenses-Prepaid