cash flows in project analysis

Question 1

What are incremental cash flows in project analysis

Answer 1

• things that change after undertaking a project

Question 2

• How do we handle sunk costs and allocated costs?

Answer 2

• Are things that dont change if we take on a project

- Ignore

Question 3

Opportunity costs?

Answer 3

• consequence of decision

- subtract it

Question 4

capital costs?

Answer 4

• post tax
• > count at full
• > subtract and may get it back later, depending

Question 5

Income and expenses

Answer 5

• before tax
• > calculate the tax and subtract the tax away,
• > e.g. 1mil income,
• > CF = -700k

Question 6

depreciation

Answer 6

• tax shield
• > not a cash flow but looks like it
• > 1m depreciation can save you 300k on a deduction against ur income