10.2 Estimating Cash Flow for Projects: Incremental Cash Flow
Our objective now is to estimate the timing and amount of cash flow of a proposed project so that we can apply one of the capital budgeting decision models from Chapter 9 . These projected revenues and costs, which form the basis of the project’s potential acceptance or rejection, are estimates of future activity. Often, these estimates will start with sales forecasts and the production costs associated with the sales forecast to arrive at the project’s anticipated operating cash flow. We usually look at the project’s initial outlay as its capital expenditure and determine depreciation from this capital expenditure.
At first glance, it would seem that we just want to estimate the ...
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