The heart of discounted cash flows analysis is the assumptions behind the number
ID: 2658921 • Letter: T
Question
The heart of discounted cash flows analysis is the assumptions behind the numbers. Once the mechanics of the tool are mastered, then one needs to focus on the assumptions behind the numbers.
How might a manager manipulate the assumptions behind a discounted cash flows analysis of a project to ensure a favorable result (e.g. positive NPV)?
If you are in a position to review and approve capital projects that have been evaluated using DCF techniques, how should you guard against being manipulated?
Explanation / Answer
he can manipulate the cash flows by following different accounting procedure than usual accounting procedure.So if i am given to reviewit, i will check all accounting statements related to cash flow so that if any mistakes are there, they can be identified
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