4. Cash-Flow Analysis
• If a capital equipment request survives the
new project ideas step, cash-flow estimates
must be considered for each capital
investment idea.
• The after-tax cash inflows and outflows of
each capital project alternative must be
evaluated on an incremental cash-flow basis.
• Three criteria should apply to the cash-flow
analysis:
– The net cash investment.
– The net cash flow.
– The economic life of the project.