FINANCIAL CASH FLOW FOR PROJECT
Coordinating the plans of technical
construction, finance, economic
analysis, and available resources
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
CONSTRUCTING
FINANCIAL CASH FLOW
FOR PROJECT
CAO HAØO THI
PROJECT CASH FLOW PROFILE
Cash receipt minus cash expenditure
Operational phase
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Initial investment
phase
Cao Hao Thi 1
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
PRINCIPLES FOR CONSTRUCTING
CASH FLOW
Including only CASH RECEIPT and CASH
EXPENDITURE
OPPORTUNITY COST
SUNK COST
RULES OF CONSTRUCTING CASH
FLOW
END OF YEAR: Cash receipts and cash
expenditures within one year are
recorded at the end of that year
Year 0
Disposal time (liquidation time)
Cao Hao Thi 2
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
CONSTRUCTING CASH FLOW PROFILE
FOR INVESTMENT PLAN
Coordinating the plans of technical
construction, finance, economic
analysis, and available resources
CONSTRUCTING CASH FLOW PROFILE
FOR OPERATION PLAN
Coordinating market and resources
analyses, determining the receipts and
expenditures for project operation
Cao Hao Thi 3
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
BASIC VARIABLES IN CASH FLOW SATATEMENT
DEPRECIATION
Why is there the concept of
depreciation cost?
Is depreciation cost an item in cash
flow statement?
BASIC VARIABLES IN CASH FLOW STATEMENT
DEPRECIATION
Using depreciation cost to determine
the cash flow pattern:
– Calculating tax expenditure
– Calculating disposal value
Cao Hao Thi 4
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
BASIC VARIALBES IN CASH FLOW STATEMENT
CASH RECEIPT and SALES
Sales,
Account receivable (AR) and Cash
Receipt
Cash Receipt in period =
Sales in period + (ARbeginning – ARend)
BASIC VARIALBES IN CASH FLOW STATEMENT
CASH EXPENDITURE and PURCHASES
Purchases,
Account Payable (AP)and Cash
Expenditure
Cash Expenditure in period =
Purchases in period + (APbeginning –
APend)
Cao Hao Thi 5
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
BASIC VARIALBES IN CASH FLOW STATEMENT
CASH
Cash balance (CB)
Cash needed to do transactions in project
operation
Increase in CB is an outflow
Decrease in CB is an inflow
BASIC VARIALBES IN CASH FLOW STATEMENT
LAND COST
Investment in land Vs. investment in project
Dealing with land as a separate investment.
Don’t include profit/loss of investment in land
as receipt/expenditure in project as long as
there is no direct improvement/destruction for
the land created by the project
Land cost is the opportunity cost, the annual
lending cost or capital cost of the project in
the time of using land.
Cao Hao Thi 6
Fulbright Economics Teaching Program, 2004-2005 The Appraisal of Development Expenditures -
Constructing Financial Cash Flow for Project
PROJECT APPRAISAL POINTS OF
VIEW
Financial appraisal
– Equity point of view
– Total Investment point of view (TIP)
ECONOMIC POINT OF VIEW
OTHER POINTS OF VIEW
PROJECT APPRAISAL POINTS OF
VIEW
TIP EQUITY ECONOMIC BUDGET
Cash receipt + + +
Cash expenditure - - -
Opportunity cost - - -
Subsidy + + -
Tax - - +
Borrow/Payment +/- -/+
Externality +/-
Cao Hao Thi 7
