What This Document Is
These are PowerPoint notes intended to help students prepare for the fourth finance test (FIN 311) at Binghamton University. The notes cover topics related to capital budgeting – the process companies use to evaluate and select long-term investments. It focuses on determining the value of potential projects and understanding the cash flows associated with them.
Why This Document Matters
This study guide is valuable for students enrolled in Financial Management at Binghamton University who are studying for their fourth exam. It serves as a condensed review of key concepts and formulas related to capital investment decisions. It’s most useful when used *in conjunction with* course lectures, the textbook, and other assigned materials. It exists to help students efficiently focus their exam preparation.
Common Limitations or Challenges
This document is a *preview* of notes and does not provide in-depth explanations or practice problems. It won’t teach you the concepts from scratch, nor will it solve problems for you. It’s a memory aid, not a substitute for understanding the underlying principles. A strong grasp of pro forma financial statement creation is assumed.
What This Document Provides
The full document includes an overview of:
* Capital budgeting processes and methods.
* Calculating Cash Flow From Assets (CCFA) using pro forma statements.
* Identifying relevant incremental cash flows (and which cash flows to exclude).
* Types of incremental cash flows: opportunity costs, side effects, and erosion.
* Accounting for the sale of old equipment and changes in net working capital.
* Methods for computing Operating Cash Flow (OCF) – Bottom-Up, Top-Down, and Tax Shield approaches.
* The creation of pro forma income statements.
This preview *does not* include detailed examples, practice questions, or a complete explanation of all formulas. It also does not cover financing decisions, which are intentionally excluded from the scope of these notes.
