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Assignment Questions

Research on Cash Flow

1 ?What is the difference between accounting income and cashflow? Which do we need to use when making decisions by using NPV ? Explain in short

2?A positive NPV is a good start ? now we need to take a closer look
1. Forecasting risk : How sensitive is our NPV to changes in the cash flow estimates; the more sensitive, the greater the forecasting risk ( explain which conditions we accept the risk for both investors and company point view)
2.Sources of value : Why does this project create value for both invertors and company point view?

3?What happens to the NPV under different cash flow scenarios?
We need to take a closer look: Explain what conditions we can accept or reject each of the following case for both invertors and company?
1. Best case ? high revenues, low costs
2. Worst case ? low revenues, high costs
3. Measure of the range of possible outcomes

4?In sensitivity analysis , what happens to NPV when we change one variable at a time
(This is a subset of scenario analysis where we are looking at the effect of specific variables on NPV) so what are the variables that effects the NPV in the sensitivity analysis for both investors and company point view ?

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