Cumulative cash position

Fig. 2. (— —) Cumulative and (—° —) 8% discounted cash flow rate for development of a hypothetical agrochemical in constant 1994 U.S. dollars, where A represents the time the patent was first issued B, first registered use C, manufacturing plant start-up D, positive cumulative cash flow and E, patent...

Cumulative Cash Position Table To organize cash flow calculations, it is suggested that a cumulative cash position table be prepared by using an electronic spreadsheet. For this discussion. 

Example 8 Cumulative Cash Position Table (Time Zero at Start-up) A specialty chemical company is considering the manufacture of an additive for use in the plastics industry. The following is a list of production, sales, and cash operating expenses. 

Land for the project is available at 300,000. The fixed capital investment was estimated to be 12,000,000. A working capital of 1,800,000 is needed initially for the venture. Start-up expenses based upon past experience are estimated to be 750,000. The project qualifies under IRS guidelines as a 5-year class life investment. The company uses MACRS depreciation with the half-year convention. At the conclusion of the prmect, the land and working capital are returned to management. Develop a cash flow analysis for this project, using a cumulative cash position table (Table 9-25). 

Cumulative Cash Position Plot A pictorial representation of the cumulative cash flows as a function of time is the cumulative cash position plot. All expenditures for capital as well as revenue from sales are plotted as a function of time. Figure 9-11 is such an idealized plot showing time zero at start-up in part a and time zero when the first funds are expended in part b. It should be understood that the plots have been idealized for illustration purposes. Expenditures are usually stepwise, and accumulated cash flow from sales is seldom a straightline but more likely a curve with respect to time. 

FIG. 9-11 Typical cumulative cash position plot, (a) Time zero is start-up. (b) Time zero occurs when first funds are spent. 

The cash flow diagram shown in Fig. 6-1 represents the steady-state situation for cash flow with sf, cQ, and d all based on the same time increment. Figure 6-2 is for the same type of cash flow for an industrial operation except that it depicts the situation over a given period of time as the cumulative cash position. The time period chosen is the estimated life period of the project, and the time value of money is neglected. 

Graph of cumulative cash position showing effects of cash flow with time for an industrial operation neglecting time value of money. 

Crystallizers, cost of, 561 Cumulative cash position, 152-154 Current assets, 140-141... 

Example 8 Cumulative Cash Position Table (Time Zero at Start-up). 9-28... 

Case 1. The negative cash flow cumulatively increases to 29 million in 1998 and starts to turn around because of positive [AT in 1999 and 2000 but is still a poor business prospect because of large investment requirements compared to [AT. 

For evaluating different projects, three discounted profitability criteria have been widely used time criterion, cash criterion, and interest rate criterion [7]. The time criterion is the discoimted payback period (DPBP), which is the time that is needed to recover the fixed capital investment (except land and WC) after the plant starts up. The cash criterion is known as net present value (NPV), which is the discounted cumulative cash position that can be calculated by summing all cash flows, positive and negative, as shown in Eq. [6.1] ... 

One is the pay-back period this is the time required for the project to achieve a positive net cash flow. For the project in the table, this is four years, since the first positive cumulative cash flow is 47,130, at the end of year 3 (remembering that we start from year 0). We can also calculate the internal rate of return (IRR) on the project. This is the cost of capital which would lead to the NPV being precisely zero it is calculated by solving the equation 5... 

Cash Criterion. The criterion used here is the cumulative cash position (CCP), which is simply the worth of the project at the end of its life. For criteria using cash or monetary value, it is difficult to conpare projects with dissimilar fixed capital investments, and sometimes it is more useful to use the cumulative cash ratio (CCR) which is defined as... 

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