Estimating Project Cash Flows

The cash flow estimation is important to evaluate projects in view of adding values to the owners’ equity of a firm. Cash flow estimation is a primary requirement for capital budgeting and using project evaluation techniques. Hence, this paper provides cash flow estimation methods from an accounting perspective to facilitate a reader understand the basics and bases of cash flows estimation with suitable exhibits from an accounting point of view. This paper provides explanations on basic principles of project cash flow estimation, meaning of incremental cash flow, trade-off between the equity and debt capitals used in projects, reason for excluding the cost of financing a project, tax concern, opportunity cost consideration, and the process and methods of estimating cash flows.