Additional overhead

Using discounted cash flow analysis to make investment decisions

costs: A project may
Terminal cash generate extra overhead
flows: The end costs, but then again it
Determine working may not. We
of a project should be cautious about
capital: determine
almost always Determine Present assuming that the
if additional Determine Incremental
brings accountants allocation of
working capital is value of cash Cash flow: used to
additional cash overhead costs
needed inflow and outflow: determine additional
flows. Sale of operating cash
used to
assets flow that an
current worth of organization receives
Determine Cost of a future sum of from taking on a new
investment: Initial money or stream project

cash inflow of cash flows

DECISION: Accept or
Reject project or
Project cash flows: Cash Determine Net investment
inflow of cash outflow for present value:
the near future Used in capital
budgeting to
analyze the
Terminal cash profitability of a
projected
flows: The end
investment or
of a project
project.
almost always
brings
additional cash
flows. Sale of
assets