ABSTRACT
This chapter defines the multiple cash flows to the evaluation and structure of the financing of a project. The unlevered expansion is compared to the unlevered no-expansion in order to determine the incremental cash flow effects. Assessment of the project's inherent economic attractiveness should be conducted through calculation of the net present values of the incremental cash flows. The relevant cash flows are those which allow for assessment of the project's overall ability to service debt as well as the incremental levered cash flows accruing to each project participant. A case study, a modified version of a successfully financed copper mining venture in Latin American, is used to provide an example of the cash flow forecasting methodology. Since the increase in working capital is very often a significant cash requirement, assuming a fixed working capital amount can severely distort cash flows and lead to incorrect assessment of a project's profitability and ability to service debt.
