I need to determine whether an existing business should take on a new expansion or not....

I need to determine whether an existing business should take on a new expansion or not. What would be the layout for the cash flow statement? Do I enter the details for both the existing business and the expansion separately in the one cash flow?

Expert Solution


LAYOUT FOR CASH FLOW STATEMENT

Year	0	1	2	3	4	5	6	..till life of project
Initial Cash flows:
Cash flow due to investment in Fixed assets
Cash flow due to Increase in working capital
Total Initial Cash Flow
Operating Cash Flows:
Additional units sold after expansion
Sales price per unit
Variable cost per unit
Sales Revenue
Variable cost
Fixed operating cost
Annual Depreciation
Before tax Income
Tax expenses
After tax income
Add: Depreciation
Operating Cash Flow
Terminal Cash flows:
Release of additional working capital
After tax cash flow from salvage
Total Terminal cash flow
NET CASH FLOW

In case any revenue of existing product is affected by expansion (increase or decrease), the same should be included
Otherwise details of existing business need not be included

jeff jeffy answered 1 year ago

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