Cash flows generation

In this case, the lives of the machines are unequal, and the comparison is conveniently made on the basis of capitalized cost. This puts lives on the same basis, which is an infinite number of years. The net annual cash flows generated by each machine are equal. 

A method of financing development whereby a company (the lessee) may rent equipment owned by a third party (the lessor) out of cash flow generated by that equipment. 

Cash Payback is calculated by a cash flow analysis. The cash flow generated by an investment is the cash value of the benefits it achieves less the cash outlays to pay for the capital investment. Assuming that the system s costs precede its benefits, cash... 

The Net Present Value (NPV) of a capital investment is the equivalent total cash flow generated by all the acquisition s benefits less all the acquisition s costs computed over the life of the system on a year to year basis, adjusted for the value of money as reflected by such factors as finance rates, and projected ("discounted") to the present day. A dollar benefit projected for the system next year would only be worth 0.91 today if that dollar could be earning 10% interest. A net present value of zero means that the acquisition will, over its projected life, just break even and that it is therefore an acceptable purchase. A better than zero NPV would be a high priority purchase since it indicates a real profit. 

Pomper (1976, p. 150) explicitly estimated terminal values and integrated them into his model. He calculated the additional cash flows generated by each alternative network configuration in the final period of the planning horizon as compared to the "do-nothing" option. To determine terminal values incremental cash flows were capitalized over a period of 10 years. However, this approach was only possible because all alternative final-period network configurations were known up front due to the backtracking solution procedure employed. 

The Investment outlay is represented by the net Investment required for the new equipment or change In operation, and the economic gain Is represented by estimated operating cash flows generated by the Investment. Different companies use different criteria for comparing outlays and gains. 

To measure the net after-tax returns on R D, the cash flows generated by the sale of each product in the years following market launch must be reduced by the amount of taxes they cause to be paid. Ideally, the reduction in cash flows would be equal to the extra tax paid in each year of the product s life as a direct result of manufacturing and selling the product. 

The asset swap is an agreement that allows investors to exchange or swap future cash flows generated by an asset, usually fixed rates to floating rates. It is essentially a combination of a fixed coupon bond and an IRS. We define it thus ... 

The challenge facing the designers of RMBS transactions is to provide a structure that will provide an attractive investment while being able to handle the uncertain nature of the cash flows generated by the underlying mortgages. A transaction will usually be structured into several classes of notes with different expected maturities and different risk profiles to appeal to a variety of investors. 

Debt Service Coverage Ratio (DSCR) = Net Operating Income / Debt Payments and so indicates a borrower s ability to repay a loan with a DSCR of less than 1.0, meaning that there is insufficient cash flow generated by the property to cover required debt payments. 

The production phase commences with the first commercial quantities of hydrocarbons ( first oil ) flowing through the wellhead. This marks the turning point from a cash flow point of view, since from now on cash is generated and can be used to pay back the prior investments, or may be made available for new projects. Minimising the time between the start of an exploration campaign and first oil is one of the most important goals in any new venture. 

A.nnual Cash Dlow. The net aimual cash flow is the actual cash generated by the project ia a given year. This can be defined for any project year as... 

Comparisons on the Basis of Capitalized Cost A machine in a process generates a positive net cash flow of 1000. Two alternatives are available machine L, costing 2000, requires replacement every 4 years, and machine M, costing 3000, requires replacement every 6 years. Neither machine has any scrap value. The cost of capital is 10 percent. Which machine is the more profitable to operate ... 

Relationship between (PBP) and (DCFRR) For the case of a single lump-sum capital expenditure Cpc which generates a constant annual cash flow Acf in each subsequent year, the payback period is given by the equation... 

Here, p is the number of payback periods that have elapsed since the project started to generate positive net annual cash flows Acp up to any given year n since project startup. It is given by... 

If instead we can sell the waste, then we not only have eliminated these costs, but in addition have generated a positive cash flow into our operation for the sale of the waste. This is what we mean by pollution prevention practice. 

C-D The cash-flow curve turns up at C, as the process comes on stream and income is generated from sales. The net cash flow is now positive but the cumulative amount remains negative until the investment is paid off, at point D. 

Solution. Because the annual cash flows are uniform for projects C and D, we can apply Equation (3.4a). The internal rates of return are ic = 0.15 for project C and iD = 0.25 for project D. The advantage of project D is a more concentrated period of early cash, generation at a high level. For a value of i = 0.08, the NPV of each project is as follows ... 

Therefore, based strictly on this calculation, project C would be favored over D because over its lifetime (20 years versus 5 years), it would generate more (discounted) cash flow. This conclusion is in conflict, however, with that obtained by comparing the IRRs of the two projects. The ranking based on NPV may change if a... 

All projects involving any significant quantity of LNAPL product recovery require the consideration of economic factors. Careful planning to optimize each project phase can lead to the lowest cost of operation and can occasionally generate positive cash flow, while currently accomplishing aquifer restoration. A basic premise in this discussion is that the recovered LNAPL is suitable for reuse (i.e., as refinery feed stock or fuel for incinerators). Products unsuitable for resale only add to the debit side of the economic equation. 

The cash flow diagram, also referred to as a cash flow model (Fig. 9-9), shows the relationship between revenue, cash operating expenses, depreciation, and profit. This diagram is similar in many respects to a process flow diagram, but it is in dollars. Revenue is generated from the... 

Cash Flow Method Cash flows for each case are determined, and the case that generates the greater cash flow is the preferred one. 

Pay-back time is the period required to recover the money initially invested in the project. Thus, the pay-back time is represented by the period (1-6) in the cash-flow diagram (Figure 13.5). The pay-back time is not just the period required for profits to be first generated—sufficient profits then have to be made to cover the initial expenditures made. 

In addition a project needs to repay its costs. Therefore it is more realistic to use cashflow values rather than income values to calculate present values. A series of present values can be generated at time intervals by projecting the cash-flow of a project into the future. Obviously the early ones will tend to be negative, but hopefully they will be more than balanced by large positive present values later on when the product has become successful. NPVs (net present values) are additive. Therefore, the net present value is the summation of all the individual component cash-flow derived present values, and is... 

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