Purchase Solution

Cash Flows Differences in accepting projects is referred to

Not what you're looking for?

Ask Custom Question

The difference between a firm's future cash flows if it accepts a project and the firm's future cash flows if it does not accept the project is referred to as the project's_________?

incremental cash flow
internal cash flows
external cash flows
erosion effects
financing cash flows

Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation to answer the difference between a firm's future cash flows if it accepts a project and the firm's future cash flows if it does not accept the project.

Solution Preview

The difference between a firms future cash flows if it accepts a project and ...

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

View More Free Quizzes
Related BrainMass Solutions

  • Capital budgeting: manufacturing company launch new product

    The reason is that the present value of the future after tax cash flows is greater than the cost of the new plant and the working capital needed to fund the project.

  • Finance:Capital Budgeting Techniques

    (Profitability Index, measuring cash flows, analysis of the potential risks associated with cash flows, the impact of inflation on capital budgeting decision). The solution is presented in a Word document. The solution is clear and concise.

  • Calculating the various capital budgeting parameters

    Assume that all cash flows arise on the anniversaries of the initial outlay, that there are no price changes over the project lives, and that accepting either project will have no impact on working capital requirements.

  • Project has normal cash flows

    - does not directly account for differences in risk among projects ) Assume a project has normal cash flows.

  • Payback period and NPV

    (2) The payback rule also fails to consider risk differences. The payback would be calculated the same way for both very risky and very safe investments. Finally, the payback method completely ignores all cash flows beyond the payback period.

  • Capital Budgeting

    The payback is very close to 3 years now and will go beyond 3 years. In that case, the project may not be accepted. The solution explains the calculation of cash flows, payback period and NPV for a project.

  • Screening Capital Projects

    Once the project is to be considered, then we use the Net Present Value (NPV) method to accept or reject the project. For this purpose we discount the project cash flows at the WACC. The WACC is calculated using our target capital structure in mind.

  • IRR was lower than the cost of capital

    As we have stated earlier, the IRR is biased towards projects with higher initial cash flows, hence the IRR would be higher for those projects whose initial cash flows are higher, yet that does not necessarily mean that those projects would have the higher

  • Incremental cash flows

    Payback period is the time taken to recover the initial investment. To calculate the payback, we calculate the cumulative cash flows and see when the cash flows become positive since that would imply that initial investment is recovered.

View More Related Solutions