Question

In: Finance

A project’s total (or net) cash flow will decrease when the ____________________. A) sales projections are...

A project’s total (or net) cash flow will decrease when the ____________________.
A) sales projections are higher
B) net working capital requirement decreases
C) variable costs decrease
D) depreciation expense decreases

Solutions

Expert Solution

A project's total (or net) cash flow will decrease when the:

D) depreciation expense decreases

Note:

1) Depreciation is a non-cash expenses which allows as deduction from the gross profit of a company as a the tax liability or tax payable will be low. So, if the depreciation expense decreases higher tax will be payable as a result the free cash flow / net cash flow will decrease and vice-versa.

2) HIgher sales projections, decrease in variable cost and decrease in net working capital requirement increase the total (or net) cash flow from project.

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

The payback of a project is the number of years it takes before the project’s total cash flow is positive.
The payback of a project is the number of years it takes before the project’s total cash flow is positive. Payback ignores the time value of money. It is interesting, however, to see how differing assumptions on project growth impact payback. Suppose, for example, that a project requires a $300 million investment at year 0 (right now). The project yields cash flows for 10 years. The annual cash flow growth is assumed to be 15% per year. Assume that this...
For a company, the cash flow from assests (or free cash flow) projections for the next...
For a company, the cash flow from assests (or free cash flow) projections for the next three years are as follows. After year 3, the company will continue growing at a constant rate of 1.5%. the firm's tax rate is 3% and will maintain a debt-equity ratio of 0.50. the risk-free rate is 3%, the expected market risk premium over the risk free rate is 6%, and the company's equity beta is 1.50. The company's pre-tax cost of debt is...
when the cash balance equal net cash flow for startup business?
when the cash balance equal net cash flow for startup business?
Below are a target's free cash flow projections and it's projections of interest expense from debt....
Below are a target's free cash flow projections and it's projections of interest expense from debt. The target's expect constant growth rate is 6%. It's unlevered cost of capital is 11.56%. The tax rate is 40%. Use this information to calculate 1) The unlevered value of the target 2) the value of the tax savings from interest expense and 3) the value of the target's operations. tax rate 0.4 unlevered cost of capital 0.1156 constant growth rate for terminal cash...
Is this part of the task taken into account when calculating net cash flow of the...
Is this part of the task taken into account when calculating net cash flow of the project? "The launching of the new product is expected to lead to a reduction in sales of the existing product. The contribution from existing sales is expected to reduce by €50,000 per annum over the life of the new product. Working capital of €500 000 will be required at the beginning of the project."
QUESTION 14 The following table presents the initial cash outlay and cash flow projections for a...
QUESTION 14 The following table presents the initial cash outlay and cash flow projections for a new line of digital cameras that DigiCam is evaluating: Year Cash inflow / outflow Amount of cash flow 0 Initial cash outlay for buying plant and equipment (at the beginning of Year 1) $2,350,000 1 Net operating pretax cash inflows $1,000,000 2 Net operating pretax cash inflows $1,200,000 3 Net operating pretax cash inflows $1,300,000 3 Salvage value (at the end of Year 3)...
can the cash balance be less than net cash flow for first year when this happens?
can the cash balance be less than net cash flow for first year when this happens?
Net Cash Flow From Operating Activities Verna Company's records provided the following information for 2016: Decrease...
Net Cash Flow From Operating Activities Verna Company's records provided the following information for 2016: Decrease in accounts payable, $4,600 Loss on sale of land, $1,900 Increase in inventory, $7,800 Increase in income taxes payable, $2,700 Net income, $68,400 Patent amortization expense, $1,600 Ordinary loss, $6,200 Decrease in deferred taxes payable, $2,500 Amortization of discount on bonds payable, $1,300 Payment of cash dividends, $24,000 Depletion expense, $5,000 Decrease in salaries payable, $1,400 Decrease in accounts receivable, $3,500 Gain on sale...
Net Cash Flow From Operating Activities Verna Company's records provided the following information for 2016: Decrease...
Net Cash Flow From Operating Activities Verna Company's records provided the following information for 2016: Decrease in accounts payable, $4,600 Loss on sale of land, $1,900 Increase in inventory, $7,800 Increase in income taxes payable, $2,700 Net income, $68,400 Patent amortization expense, $1,600 Ordinary loss, $6,200 Decrease in deferred taxes payable, $2,500 Amortization of discount on bonds payable, $1,300 Payment of cash dividends, $24,000 Depletion expense, $5,000 Decrease in salaries payable, $1,400 Decrease in accounts receivable, $3,500 Gain on sale...
Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow...
Determining Net Income from Net Cash Flow from Operating Activities Curwen Inc. reported net cash flow from operating activities of $193,000 on its statement of cash flows for the year ended December 31. The following information was reported in the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $3,700 Decrease in inventories 9,300 Depreciation 14,300 Gain on sale of investments 6,400 Increase in accounts payable 2,600 Increase...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT