Financial Management: Principles and Applications, 13/e

12.1 Project Cash Flows

Figure 12.1 characterizes typical project cash flows for a capital investment into one of three categories of cash flow:

Figure 12.1

The Anatomy of Project Cash Flows for the Typical Investment

Project Life Cycle	Initial Investment Period	Interim Operating Period	Terminal Period
Relevant cash flows	Costs of purchasing plant and equipment Costs of installing equipment and training employees Investment in working-capital requirements (e.g., investments in accounts receivable and inventories less those in accounts payable)	Incremental revenues Incremental expenses Incremental taxes Increase in working-capital requirements Incremental capital expenditures for plant and equipment	Proceeds from the disposal ...