Project Cash Flow Essay Example | Topics and Well Written Essays - 1000 words

Project Cash Flow - Essay ExampleTherefore to hold back the money later you will certainly want a reasonable compensation for the delayed consumption, the fortune or uncertainty and the inflation. All these factors delayed consumption, uncertainty and inflation determine the interest rate everywhere a certain amount of money which is due at present but the acquisition of which is do off till a future date.In any billet when a person or group flexs or become indifferent to these three factors then the value of time to that person or group in that particular situation ceases to matter. The situation can be caused by internal factors as well as external factors or both. We can imagine few such situations, for use if in a hospital the anaesthesia mould goes bust in the mid of an operation and the standby machine is at nearly other OT then irrespective of rational comparisons a new machine has to be ordered because the situation demands it, or for example if there is fire in a f actory and machines become unavailable for completing the order at hand worth millions of dollars then new machinery has to be put for as soon as possible without going into much details of profitability etc. The example that we have taken are extreme cases. In real life, situations generally lie mid focussing between conditions of very high emergencies to conditions of no pressure at all. There is usually existence of some pressures which limits the time that can be infinitely spent on arriving at the best analysis. In real life decision do is often done amidst many known and many unknown variables.1Situations of implicit unpredictability Situations of absolute predictabilityReliance on the available and Reliance on involved decision making toolseasy to operate decision making toolsII) Time value of Money-estimating the discount rate The predictability of a situation depends on a host of internal and external factors. Internal factors can hold the knowledge and bed of the or ganization the management information and coordination systems, the resources and time available to the organization etc. The external factors can include the market forces and the business environment. In the case of applying time value analysis in project decisions the uncertain factor is the cost of capital 2.The estimation of cost of capital or the discounting rate is a complex process and its accuracy depends on many factors. Estimating the cost of capit