You are adding back the $18 million in depreciation tax benefits because you would get it any way (with or without this project). It is not incremental.
Sir, could you please tell why are we subtracting the Pre Project Depreciation* Tax rate ($18) every year, while calculating the incremental cash flow.
naaa....we hv to add back....coz we are calculating cash flows by deducting all expenses related to this potential project from the potential earnings of this project. But since sunk cost and GA will anyhow incur whether we take the prjct so not.....so their load wont be subtracted as current project's expenses and so we will add them back as they shld not anyhow affect our incremental cashflows.
@@aparnabajpai9580 thanks for your help. I’m still a bit confused though about G&A. I think in getting from Cash Flow to Firm to Incremental CF, we should add the 1/3 of G&A - which represents the variable part of G&A. When we take on the project, this 1/3 is the incremental increase in G&A. The other 2/3 is fixed and will be there in any case. But, the Professor is adding the 2/3rd part and ignoring 1/3. And I’m not understanding why.
@@SFW7 actually out of the TOtal GnA....we are allocating 2/3rd in this potential project if successfully taken up and 1/3rd elsewhere by the company.....but if we do not take up the project, yet the company will bear the same 2/3rd GnA elsewhere....so no sense in loading this expense as incremental expense....and so we r adding it back as it isn't an expense exclusively on the account of taking up this project but will incur anyhow.
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Thank you for these presentations
I believe the IRR shown near the end of the video is incorrect for the Disney example.
You are adding back the $18 million in depreciation tax benefits because you would get it any way (with or without this project). It is not incremental.
Sir, could you please tell why are we subtracting the Pre Project Depreciation* Tax rate ($18) every year, while calculating the incremental cash flow.
What is the difference between present value and NBV
Thank u so much professor
In the page with the discounting formulas, what is the difference between simple cash flow and perpetuity? CFn/(1+r)^n vs A/r please?
In perpetuity cash flow will be for infinity
5:56 (1+g) in the 3 equation after "A" seems redundant
Should we be subtracting sunk cost and allocated G&A expense rather than adding them?
naaa....we hv to add back....coz we are calculating cash flows by deducting all expenses related to this potential project from the potential earnings of this project. But since sunk cost and GA will anyhow incur whether we take the prjct so not.....so their load wont be subtracted as current project's expenses and so we will add them back as they shld not anyhow affect our incremental cashflows.
@@aparnabajpai9580 thanks for your help. I’m still a bit confused though about G&A. I think in getting from Cash Flow to Firm to Incremental CF, we should add the 1/3 of G&A - which represents the variable part of G&A. When we take on the project, this 1/3 is the incremental increase in G&A. The other 2/3 is fixed and will be there in any case. But, the Professor is adding the 2/3rd part and ignoring 1/3. And I’m not understanding why.
@@SFW7 actually out of the TOtal GnA....we are allocating 2/3rd in this potential project if successfully taken up and 1/3rd elsewhere by the company.....but if we do not take up the project, yet the company will bear the same 2/3rd GnA elsewhere....so no sense in loading this expense as incremental expense....and so we r adding it back as it isn't an expense exclusively on the account of taking up this project but will incur anyhow.