Project Cash Flows A First Look

The effect of taking a project is to change the firm's overall cash flows today and in the future. To evaluate a proposed investment, we must consider these changes in the firm's cash flows and then decide whether or not they add value to the firm. The first (and most important) step, therefore, is to decide which cash flows are relevant and which are not.

incremental cash flows

The difference between a firm's future cash flows with a project and those without the project.

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