Incremental cash flow

Figure 4-106. Net incremental cash flow for one- and two-stage power recovery expander schemes.

The electric power usage is the primary expense incurred when using a motor driver. Table 4-10 documents these findings and the net incremental cash flow using one- and two-stage power recovery expanders is shown in Figure 4-108. 

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. 

Applying two important tax credits would improve the early years cash flow and shorten the payback period. A 10% investment tax credit and a 10% energy tax credit applied to the incremental capital costs for the expanders yields nearly 1.0 million additional first-year cash... 

The basis for the calculations will be L = 100m. Because the insulation comes in 1-cm increments, let us calculate the net present value of insulating the pipe as a function of the independent variable jc vary x for a series of 1-, 2-, 3-cm (etc.) thick increments to get the respective internal rates of return, the payback period, and the return on investment. The latter two calculations are straightforward because of the assumption of five even values for the fuel saved. The net present value and internal rates of return can be compared for various thicknesses of insulation. The cost of the insulation is an initial negative cash flow, and a sum of five positive values represent the value of the heat saved. For example, for 1 cm insulation the net present value is (r = 0.291 from Table 3.1)... 

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. 

Therefore, a gain of 785,000 — 398,000 = 387,000 is made in 7 years by an added investment of 70,000 if investment No. 2 is made instead of investment No, 1. The discounted-cash-flow rate of return for this incremental investment is... 

In the final year of the project, the working capital is released and should be taken as a positive increment to the cash flow. This is shown as occurring in year 20 in Figure 6.12, but should be adjusted when the length of the project is varied, as described later. 

To optimize the flooding processes, we first have to select which optimization criterion to use. Generally, we choose incremental oil recovery factor as a criterion. Alternatively, we may choose maximum NPV as a criterion with economic analysis. The latter choice is more proper because it takes into account discounted cash flow. However, performing economic analysis requires more economic data that are generally not available. The criterion to be used depends on the objective. 

Evaluating a predicted discounted net cash flow curve will determine to a large extent whether an R D result is worth commercialization. Uncertainties exist and have been incorporated in some analyses by increasing the discount percentage by an increment proportional to uncertainty. However, a prudent management must accept uncertainty risks and periodically reevaluate the decision to proceed. 

Evaluation of R D results for possible commercialization should include consideration of lAT, cash flow, incremental investment requirements and fit to present company facilities, markets, technology, and management. 

Table I Ratios of Incremental Solar System Cost to First Year Fuel Savings Consistent with Zero Relative Cash Flow for the First Year. Values Given for Marginal Tax Brackets of 30% and 50%. ...

Modularity enables adding new generating capacity in increments of 335 MW(e), to fit the electricity demand growth, and optimize cash flow. 

It is necessary in our analysis that we are sure that the last dollar invested earns at least 10%. To do this we must perform an incremental analysis on the cash flows and establish that at least 10% is made on each additional increment of money invested in the project. 

The initial step in an incremental analysis of conpeting alternatives is to identify the potential alternatives to be considered and to specify the increments over which the analysis is to be performed. Our first step is to rank the available alternatives by the magnitude of the capital cost. We will identify the alternatives as Ai, A2,. .., There are n possible alternatives. The first alternative, A, which is always available, is the do nothing option. It requires no capital cost (and achieves no savings). For each of the available alternatives, the project cost (capital cost), PC, and the yearly savings generated (yearly cash flow), YS, must be known. 

The concept of incremental economic analysis was introduced and applied to an exanple involving large capital budgets and also to a retrofit project. It was shown that both the net present value (JVPV) and equivalent annual operating cost (EAOC) methods were particularly useful when conparing alternatives using discounted cash flows. 

For the alternatives, the capital investment and the yearly after-tax cash flows are incremental to the base case. The assumed plant life is 12 years, and all of the capital investment occurs at time = 0. 

Adding increments of power as demand requires and cash flow allows,... 

All bond instruments are characterized by the promise to pay a stream of future cash flows. The term structure of interest rates and associated discount function is crucial to the valuation of any debt security and underpins any valuation framework. Armed with the term structure, we can value any bond, assuming it is liquid and default-free, by breaking it down into a set of cash flows and valuing each cash flow with the appropriate discount factor. Further characteristics of any bond, such as an element of default risk or embedded option, are valued incrementally over its discounted cash flow valuation. 

Increment in fixed assets in period t for combination of events ft/ Free cash flows in period t for combination of events ft/... 

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