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Virgin Media Inc. is come up with a project namely as Bisham which has a
total life of eight years - Essay Example
Finance & Accounting
Pages 10 (2510 words)
Virgin Media Inc. – Project Bisham Introduction Virgin Media Inc. is come up with a project namely as Bisham which has a total life of eight years. This article aims to evaluate on financial grounds whether the project is worthwhile for the company or not…
Incremental Cash Flow Approach and its Appropriateness Investment appraisal techniques basically work on the basis of incremental cash flows and not on the basis of net income. Incremental cash flows are the additional cash flows that a firm generates by investing in a particular project, thus the cash flows being generated from that project are added to the projected net income of the firm. However, in order to ensure whether a certain project is viable for the firm or not, the decision lies on the overall net cash flows pertaining to that project. The net cash flows of a particular project can be obtained by subtracting the net income of the company without accepting a project, from the net income of the firm with accepting a project. The basic formula for the incremental cash flows of a particular project is: Net cash flows of the project = Net Income of the company with the project - Net Income of the company without the project The reason behind using incremental cash flow approach in investment appraisal techniques is that it clearly states the actual cash outflows and inflows of a particular project. ...
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