DCFs

The following example generates the discounted cashflow (DCF) of a project using 20% mid-year discount factors. 

Let us consider the net annual cash flows (after tax) Acf foi projects E, F, and G, hsted in Table 9-6. The cumulative annual cash flows X Acf 3.nd cumulative discounted annual cash flows X dcf, using a discount of 10 percent for these projec ts, are also hsted in Table 9-6. We notice that the cumulative annual cash flow for each project is -i- 1000. 

DCF Direct installation cost factor SCS Stationary-container systems... 

The best w ay to evaluate free enterprise projects is to use discounted cash flow (DCF) rate of return, sometimes called internal rate of return. 

Since this calculation uses trial and error to find a discount rate at which all discounted negative and positive cash flows are equal, it can be tedious without a computer. Table 3 demonstrates this calculation for a simple set of cash flows. The DCF rate of return results in a single... 

Once the economic analysis has been completed, the project should be analyzed for unexpected as well as expected impacts on the economics. This is usually done through a set of what if calculations that test the project s sensitivity to missed estimates and changing economic environment. As a minimum, the DCF rate of return should be calculated for 10% variations in capital, operating expenses, and sales volume and priee. 

Most integral equations are based on the Ornstein-Zernike (OZ) equation [3-5]. The idea behind the OZ equation is to divide the total correlation function h ri2) iiito a direct correlation function (DCF) c r 12) that describes the fact that molecules 1 and 2 can be directly correlated, and an indirect correlation function 7( 12), that describes the correlation of molecule 1 with the other molecules that are also correlated with molecule 2. At low densities, when only direct correlations are possible, 7(r) = 0. At higher densities, where only triplet correlations are possible, we can write... 

The equlibrium between the bulk fluid and fluid adsorbed in disordered porous media must be discussed at fixed chemical potential. Evaluation of the chemical potential for adsorbed fluid is a key issue for the adsorption isotherms, in studying the phase diagram of adsorbed fluid, and for performing comparisons of the structure of a fluid in media of different microporosity. At present, one of the popular tools to obtain the chemical potentials is an approach proposed by Ford and Glandt [23]. From the detailed analysis of the cluster expansions, these authors have concluded that the derivative of the excess chemical potential with respect to the fluid density equals the connected part of the fluid-fluid direct correlation function (dcf). Then, it follows that the chemical potential of a fluid adsorbed in a disordered matrix, p ), is... 

The differential rate equation is - dCf /dt = kCffiR, and the mass balanee equation is Ca i A = r r- Eliminating Ca between these equations and integrating gives the usual second-order integrated equation, whieh can be written in this form ... 

Any presentation to the organization s senior management, besides giving the technical details, should include a financial appraisal, which could be on a simple payback basis. However, other methods are available, such as return on capital employed and discounted cash flow (DCF). 

Table 61.1 Application of NPV. To illustrate the uses of the two DCF methods the following example assumes the following data relating to two competing projects...

Discounted cashflow (DCF). This method recognizes that 1,000 income in five years time is worth less than 1,000 receivable this year. The use of DCF in appraising two or more competing projects offers two methods of assessment the net present value (NPV) or DCF rate of return. 

The principle of NPV is best understood by applying an agreed discounting rate, that is, the best investment rate obtainable by the company, to the sum to be invested. A discounting rate of 10 per cent assumes that 100 invested now will be worth 110 in a year s time. Conversely, it is assumed that 110 in a year s time is, at 10 per cent, worth 100 today. From these assumptions, it is possible to construct DCF tables for varying numbers of years and discounting rates (see Table 61.1). 

The use of NPV (or DCF) leaves unresolved an important problem, that of determining the rate of interest or return to be used. Different rates of return could alter the... 

Where there are constraints upon the provision of funds then the DCF rate of return method will be the more appropriate. Where the organization has ready access to finance then the NPV method, using the known long-term borrowing rate, should be used. 

---