Capital investment analysis: three methods.
Three cash flow/discount rate methods can be used when conducting capital budgeting financial analyses: the net operating cash flow method, the net cash flow to investors method, and the net cash flow to equity holders method. The three methods differ in how the financing mix and the benefits of debt financing are incorporated. This article explains the three methods, demonstrates that they are essentially equivalent, and recommends which method to use under specific circumstances.
Gapenski
L C
LC
University of Florida, Gainesville.
D000067:Accounts Payable and Receivable; D002201:Capital Expenditures; D002202:Capital Financing / Q000191:economics*; D003365:Costs and Cost Analysis / Q000379:methods*; D003657:Decision Making; D003862:Depreciation; D005377:Financial Management, Hospital / Q000379:methods*; D007182:Income / Q000706:statistics & numerical data; D007449:Investments / Q000191:economics*; D013660:Taxes / Q000706:statistics & numerical data; D014481:United States