To list the investments that a company plans to undertake.
The process used to analyze alternate investments and decide which ones to accept.
Example 7.5.
Indirect effects of the project that may affect the profits of other business activities of the firm.
It provides a detailed illustration of a specific concept or case study.
Cláudia Custódio.
Projected revenues, costs, and net earnings associated with the project.
It illustrates a specific concept or case study relevant to the subject matter.
Textbook Example 7.1.
Textbook Example 7.3.
The tax rate on the marginal or incremental dollar of pre-tax income.
No, they should not be included.
It provides a detailed illustration of a specific concept or case study.
$15,000,000.
Cláudia Custódio.
25%.
Sale Price - Book Value.
Sale Price - (Capital Gain × Tax Rate).
Depreciation tax shield.
Present Value.
The difference between a company's current assets and current liabilities.
Cláudia Custódio.
A tax credit.
The average selling price will vary.
100,000 units/year.
A non-cash expense.
NPV = Σ (FCF / (1 + r)^t) - Initial Investment.
The asset's recovery period.
A method of depreciation that allows for accelerated depreciation schedules.
5 years.
It refers to income before interest expenses are deducted.
Textbook Example 7.1.
Cannibalization and lost rent.
It refers to the loss of sales from existing products due to new product introductions.
Textbook Example 7.8.
The content of the example is not provided.
The average cost per unit will change.
To offset gains in previous years using current year losses.
By reducing taxable income in future years.
The cash generated by a company after accounting for capital expenditures.
Capital Expenditures.
Textbook Example 7.4.
Costs that have been or will be paid regardless of the investment decision.
$300,000.
Cláudia Custódio.
Actual cash outflows when an asset is purchased.
Cláudia Custódio.
It helps assess the potential benefits lost from not using resources in their best alternative use.
Cash flows are often spread throughout the year.
Because it is a consequence of the decision to develop HomeNet.
Accelerated Depreciation.
The cash generated by a company after accounting for capital expenditures.
It refers to the loss of revenue from existing products due to new product introductions.
The incremental effect of a project on a firm's available cash.
Example 7.6.
Cláudia Custódio.
The value a resource could have provided in its best alternative use.
Cláudia Custódio.
They are included as cash outflows.
$7.5 million.
It is not directly listed as an expense; instead, it is deducted as depreciation.
Free Cash Flow.
They represent the investments made in physical assets that affect cash flow.
Revenue that could have been earned from property that is not utilized.
Example 7.7.
When sales of a new product displace sales of an existing product.
Cláudia Custódio.
Unlevered Net Income = EBIT × (1 - τ) = (Revenues - Costs - Depreciation) × (1 - τ)
They allow corporations to take losses in the current year and offset them against gains in nearby years.
Amortization.
To support operational needs and manage liquidity.
Straight Line Depreciation.
It adjusts future cash flows to their present value.
16,500 - (sum of discounted cash flows).
It indicates the company's ability to generate cash after investments, which can be used for expansion, dividends, or debt repayment.
Cláudia Custódio.
Cláudia Custódio.
The content of the example is not provided.
To estimate the additional earnings generated by a specific project or investment.
Sales will change from year to year.
Cláudia Custódio.
Earnings Before Interest and Taxes.
Typically, it is not included.
12%.
The project should be judged on its own, not on how it will be financed.
Free Cash Flow = (Revenues - Costs - Depreciation) × (1 - τ) - CapEx - ΔNWC.
The market value of the free cash flow from the project at all future dates.
The content of the example is not provided.
Four years.
Income Tax = EBIT × τc.
Cláudia Custódio.
$260.
The tax rate.
The amount by which the firm’s earnings are expected to change as a result of the investment decision.
Sale Price - (Purchase Price - Accumulated Depreciation).
HomeNet's availability reduces sales of the existing Linksys wireless router.
NWC = Current Assets - Current Liabilities.
Cash, Inventory, Receivables, and Payables.
Change in Net Working Capital.
Sunk costs and therefore irrelevant.
It refers to the income that could have been earned from property or assets that are no longer generating revenue.
Textbook Example 7.7.
The opportunity cost of not using the space in an alternative way, such as renting it out.
They are indirect effects on earnings resulting from a project's impact on existing products or services.
$7,500,000.
Costs and Depreciation.
The estimate is adjusted for this non-cash expense.
In the existing lab.
Annual Depreciation = $7.5 million ÷ 5 years = $1.5 million/year.
$110.
Cláudia Custódio.
Cláudia Custódio.
Only on the incremental costs and benefits of the product going forward.
It illustrates a specific concept or case study relevant to the subject matter.
Cláudia Custódio.
Cláudia Custódio.
The difference between current assets and current liabilities.
5 years.
The difference between receivables and payables.
Earnings, capital expenditures, and depreciation.
Free Cash Flow is derived from earnings but adjusted for non-cash items and capital expenditures.
It likely presents detailed projections and calculations for HomeNet's earnings.
Modified Accelerated Cost Recovery System.
To show the percentage of an asset's cost that may be depreciated each year based on its recovery period.
Estimating future earnings based on various factors.
$2,800,000.
It reduces taxable income, thus impacting cash flow positively.
Cláudia Custódio.
