1. Cash flow ____________________________________________________________
   1. How is Cash flow used in capital budgeting decisions____________________________________________________________________________________________
   2. What can a firm spend _________________________________________________

2. 7 issues to keep track in when estimating cash flow

1. Sunk costs _____________________________________________________________
2. Opportunity costs_______________________________________________________
3. Erosion costs____________________________________________________________
4. Synergy gains___________________________________________________________
5. Working capital__________________________________________________________
6. Capital expenditures _____________________________________________________
7. Depreciation costs_______________________________________________________

Practice Erosion Costs

3. Frosty Desserts currently sell 100,000 of its Strawberry-Shortcake Delight each year for $3.50 per serving. Its cost per serving is $1.75. Its chef has come up with a newer, richer concoction, Extra-Creamy Strawberry Wonder, which costs $2.00 per serving, will retail for $4.50 and should bring in 130,000 customers. It is estimated that after the launch the sales for the original variety will drop by 15%. Estimate the erosion cost associated with this venture.

Formula(s):

4. Working capital cash flow.Tires for Less is a franchise of tire stores throughout the greater Northwest. It has projected the unit sales and costs for each tire type for the next four months in the popup window: The company policy is to have the next month's anticipated sales for each tire type in the warehouse. Shipments are made to the various stores throughout the Northwest from the central warehouse. Calculate the monthly increase or decrease in cash flow for inventory for the first three months of the year given that an increase in inventory is a use of cash and a decrease in inventory is a source of cash.

Use for Snow, Rain, All Terrain and All Purpose Tires (1 table for each)

	Sales	Cost	Beg Inven	Ending Inven	Beg Inv $	Ending Inv $	Change in Capital
January
February
March
April