Cash Flow Estimation and Risk Analysis Chapter 12 Cash Flow Estimation and Risk Analysis LEARNING OBJECTIVES After reading this chapter, students should be able to: Discuss difficulties and relevant considerations in estimating net cash flows, and explain the four major ways that project cash flow differs from accounting income. Define the following terms: relevant cash.
Cash FlowsForum 1We focus on cash flows rather than accounting profits is because cash can spent or reinvested. Whereas, accounting profits do not represent cash flows at all which makes it a less fundamental importance for investment analysis. Capital budgeting decisions should only include those of what will be affected by the decisions made. Accounting.
Project ConstraintsProject ManagementAssignment 4Part one: Resource constraintsTiffany CoopelandProfessor:Course:Date:Resource Constraints in a projectThese include materials and equipment, people as well as project capital, as follows (Resource constraints, 2012);Having an insufficient workforce or having people with inadequate skills, not having the right people where they are needed or even a combination of all or some of these.Failure.
Npv Analysis Treats Projects as “now-Or-Never” Opportunities Real OptionsNPV misuseNPV analysis treats projects as “now-or-never” opportunitiesIt fails to account for the value associated with managerial flexibility and the value gained (destroyed) when that flexibility is created (removed).* Decision biases If an investment is irreversible and can be delayed then, there is an opportunity cost of investing today (giving.
