FIN-515- Managerial Finance Week 5_Cash Flow Estimation and Risk Analysis_Discussion_Question_2_Answ

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FIN-515- Managerial Finance Week 5_Cash Flow Estimation and Risk Analysis_Discussion_Question_2_Answer

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Cash Flow Estimation and Risk Analysis (graded) Discuss the decisions and transactions that create cash flows for a project over its lifetime. How does project cash flow differ from accounting income? Project cash flow refers to the revenue stream that results from such activities as investing, financing and operations. Accounting income reflects the amount of cash that is generated in a given period. Investors will want to examine a project's cash flow to determine where the cash is actually being generated and used so that they may get a good understanding between accounting income and project cash flow. Project cash flow refers to the revenue stream that results from such activities as investing, financing and operations. Accounting income reflects the amount of cash that is generated in a given period. Investors will want to examine a project's cash flow to determine where the cash is actually being generated and used so that they may get a good understanding between accounting income and project cash flow. Firm's net income is its accounting profit or accounting income. However, the intrinsic value of a company's operations is determined by the stream of cash flows that the operations will generate now and in the future. The value of operations depends on all the future expected free cash flows, defined as aftertax operating profit minus the amount of new investment in working capital and fixed assets necessary to sustain the business. Free Cash Flow is th

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