POINTS TO REMEMBER
  1. What are the different types of proposals?
    • Expansion proposals
    • Replacement proposals
    • Strategic proposals
    • Safety and/or environmental proposals
  2. Distinguish between proposals and projects.
    • Two independent proposals with no influence on each other’s cash flow can be treated as two projects. But two or more proposals influencing each other’s cash flow are treated as complementary/substitute/mutually exclusive proposals.

     

  3. What are different segments of cash flow?
    • Initial investment during t0
    • Operating cash flow during tx to tn
    • Terminal cash flow during tn
  4. What are the basic considerations for cash flow computation?
    • Taxes are considered.
    • Depreciation being non-cash flow expenditure is excluded.
    • Sunk cost is excluded.

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