Project Cash flow Estimate Project cash flow is

Project Cash flow Estimate Project cash flow is an essential part of investment decision Methods followed in Project Cash flow estimate are: 1. Cash flow Method For estimation of long term investment, cash flow is classified as 1. Initial Cash flow 2. Subsequent Cash flow 3. Terminal Cash flow

Initial Cash flow (Initial Cash Outflow) • Initial cash flow referrers to the cost involved in implementing a project. Subsequent Cash flow • Occurrence of Cash flow subsequent to the starting of operations is called subsequent cash flow. It includes working capital addition, repairing expenses etc. Terminal Cash flow • Cash flow generated at the end of the economic life of the project is called Terminal cash flow.

Net cash flow after tax is used for cash flow estimate Net Cash flow After Tax Net Sales Less: Cost of goods sold Less: Expenses other than interest Less: Depreciation -----------------------------------------------------------Profit Before Interest and Tax -----------------------------------------------------------Less: Taxes ------------------------------------------------------------Profit After Taxes ------------------------------------------------------------Add: Depreciation ------------------------------------------------------------- Net Cash Inflow After Taxes -------------------------------------------------------------

Terminal Cash flow Terminal Cash Inflow is calculated as: Scrap value of asset Add: Tax advantage (on loss on sale of asset if any) Less: Tax due (on gain on sale of asset if any) Add: Surplus of working capital released.