In this video, practice discounted cash flow analysis with a simple example.
- In addition to starting with a good sales forecast, … here are other basic cashflow concepts. … One, construct a comprehensive forecast … from small, intuitive building blocks. … Two, distinguish between fixed costs and variable costs. … And three, don't forget about capital costs, … both depreciable assets and working capital. … Let's look at each one of these in turn. … Construct a comprehensive forecast … from small, intuitive building blocks. … Now, consider the following question. … How many total gallons … of gasoline are purchased by retail customers, … that's people like you and me, … in the United States each year? … Now your initial response might be, … I have no idea. … But with a little thought, … you see that a reasonable estimate can be created … from small, intuitive building blocks. … Let's start with the number of people in the United States. … A quick search indicates … that the number is about 330 million. … Okay, how many automobiles per person? … Well, another quick search indicates …
- Apply concepts of the time value of money to a scenario.
- Determine the appropriate components to use when making a sales forecast.
- Predict a decision to invest or not invest based on a given fact pattern.
- Explain the determinations involved in accepting or rejecting an investment based on the required internal rate of return (IRR).
- Define terminology relating to accounting-based business decisions.
- Review the various costs involved in making a business decision based on IRR and NPV.