Project appraisal through discounted and non-discounted cash flow techniques - Essay Example

Comments (0) Cite this document
The positive Net Present Value signifies that the project, asset, of any item being forecasted will generate positive cash inflows in future and project should be accepted an initiated if the decision only bases on financial grounds, the project will generate profits in the forthcoming periods if all other factors remained constant. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.2% of users find it useful
Project appraisal through discounted and non-discounted cash flow techniques
Read TextPreview

Extract of sample "Project appraisal through discounted and non-discounted cash flow techniques"

Download file to see previous pages Positive and negative values makes it easy to understand generation of profits and losses as well as assists decision makers to focus only on the highly positive items, the precious time of management can be saved by focusing on the relevant project (Fortes, 2010; Horngren, 2005). Calculations are comparatively easy and data of any finite period can be easily converted into present value of it. Net present value analysis is derived from some basic realistic and practical assumption it is based on a fact that value of £100 today will be more than the worth of £100 after a year. Keeping this assumption in mind a net present value of future cash inflows is calculated using a discounted rate, usually the rate of cost of capital of a company or industry this rate represents the percentage minimum requirement of return by an organization per annum. Annuity factors can also be used if cash flows are constant every year.
The Net Present Value (NPV) is a useful technique to determine profitability of any item being assessed, but has few limitations as well, it only focuses on factual data that can directly hit the profit generation capabilities of an item and financial aspects only while appraising projects and does not account for the non financial aspects, areas and issue associated to that project; whereas, there is a high probability of any decision/ project to get affected by numerous external or internal non-financial events. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Project appraisal through discounted and non-discounted cash flow Essay”, n.d.)
Project appraisal through discounted and non-discounted cash flow Essay. Retrieved from
(Project Appraisal through Discounted and Non-Discounted Cash Flow Essay)
Project Appraisal through Discounted and Non-Discounted Cash Flow Essay.
“Project Appraisal through Discounted and Non-Discounted Cash Flow Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Project appraisal through discounted and non-discounted cash flow techniques

Discounted and non-discounted cash flow techniques non-discounted cash flow technique as other techniques cannot be used because the non-availability of the relevant data. The following discussion contains detailed explanation of discounted cash flow techniques. Net Present Value Net Present Value technique is the most famous project appraisal technique such that it explains the benefits of the project in an absolute financial sense. This technique provides an absolute figure as how much the...
7 Pages(1750 words)Essay

Discounted cash flow

...on this cost of equity. Thus, each analyst will have some different discounting factor in their mind. This will also vary as per the economic conditions of the country and risk factors associated with the company. 2. Cash Flow Forecast is another critical parameter where two analysts estimate always differ. It is always easy to forecast the cash flow for a few years down the line but it is not possible to have these estimates without error beyond few years. Each analyst’s perception about future market conditions and overall economic scenarios come into play. Some analyst may have a cautious approach in estimation of future cash...
3 Pages(750 words)Essay


...? Cash Flow Cash Flow ments Home Products Opening Balance of Cash/Cash Equivalents 545 421 Cash Flow from Operations Net Cash provided in operating activities Total Net Income 3,883 3,338 Depreciation and Amortization 1682 1718 Stock-based Compensation Expense 215 214 Decrease(Increase) in Receivables (170) (102) Decrease (Increase) in Inventories 256 (355) Decrease (Increase) in Other Current Assets 159 12 Increase (Decrease) in Accounts Payable & Accrued Expenses 422 (133) Increase (Decrease) in Deferred Revenue (29) 10 Increase (Decrease) in Income Taxes Payable 14 (85) Increase...
3 Pages(750 words)Assignment

Corporate finance - WACC - Cash Flow - Measuring Return on Investment - discounted cash flow techniques - Financing Decisions - the example of sunk cost which cannot be recovered and considered whether a project is accepted or rejected. Secondly, there are some expenditures, which have incurred by the firm elsewhere but their some portion is allocated to that particular project. These expenditures are known as allocated costs, e.g. marketing and selling expenses, which the firm generally incurs on the overall firm level. In short, the incremental cash flows are those cash flows which arise because of accepting that particular project otherwise they can be avoided in case of non-acceptance of the project. Sunk...
19 Pages(4750 words)Assignment

Cash Flow

...from their respective form 10-K annual reports and the following results were found: It is important to mention that the net income of all three companies include non-controlling interest (that is, non-equity shareholders). From the above analyses it is clear that there is difference between net cash provided operating activities and net income including non-controlling interest. The net income from operating activities is obtained from the cash flow statements of the firms and represents the net cash flow from operations. Operating activities are the key sources from where the company generates...
3 Pages(750 words)Case Study

Project Cash Flow

...PROJECT CASH FLOW Project Cash Flow Monisha Chattopadhyay Academia Research Q. When does it become necessary to incorporate the time value of money into project cash flow calculations A. The answer to the above question is divided into the following sections: I. Time value of Money-General Concepts II. Time value of Money-Estimating the discount rate III. When can the non discounting techniques be used IV. When does it become necessary to incorporate the time value of money into project cash flow calculations V. Project Cash Flows-an integrated approach VI. Conclusion-The nature of business decisions I) Time value of Money-General Concepts According to Sherrick, Elinger and Lins (2000, pp.3-4) If you are given... factors...
4 Pages(1000 words)Essay

Valuation and Discounted Cash Flows

...October 19, Valuation and Discounted Cash Flows Effective annual rate (EAR) is the rate of interest in use into account compounding above the year. Following are the formula of EAR, “EAR = [1 + (i/n)] ^n - 1; where i = stated annual interest rate n = number of compounding periods” (Effective Annual Rate (EAR) par. 1). Future Value of an annuity is used to decide the future value of a flow of equivalent payments. The future cost of an annuity formula can also be utilized to decide the amount of payments, the amount of the recurring payments and the interest rate. Following are the formula. “FVn = PV (1+k) n FVn = Future value at the end of the year n PV = Present value,...
3 Pages(750 words)Case Study

Cash Flow

...Free cash flow is arrived at after subtracting capital expenditure from operating cash flows. Free cash flows refer to the cash that a firm has left over after including all the expenses incurred over the financial period. Caledonia Company should focus on the project’s free cash flow as opposed to the accounting profits because a positive cash flow means the company has money to continue investing in the project. An accounting profit does not necessary mean a positive cash flow for the...
1 Pages(250 words)Assignment

Cash flow

...Finance and Accounting it is written on order instructions what you need to do exactly Contents Contents 2 Task 3 Task 2:- 5 Task 3:- 5 Task 4:- 7 References 8 Appendices 9 Task 1:- The net profit and the cash generated from operating activities of a company might not be equal for a same period of time because cash flow and net profit are different from each other. Cash flow can be defined as the money which comes in and goes out due to different financial, investment operating activities. On the other side, net profit is the amount remained from sales revenue after the deductions of all expenses of the firm. We follow the accrual method of accounting...
4 Pages(1000 words)Coursework

Cash Flow

...CASH FLOW Unit This paper talks about cash inflows and outflows in an organisation. It attempts to compare and contrast the two types of cash flow statements, that is direct and indirect cash flow statements. Either of these two types can be adopted to be used by a CFO within an organisation. Key Words: cash flow, CFO, direct cash flow, indirect cash flow Introduction Operating, investing and financing are the three sets of activities contained in the cash flow statement sections. The...
1 Pages(250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Project appraisal through discounted and non-discounted cash flow techniques for FREE!

Contact Us