A Simplified Method for Long-Term Financial Projections

When making cash-flow projections, long-term sustainable growth typically is achieved within a manageable projection period. However, when the subject company has a large depreciable asset with a significant amount of depreciation expense that will continue for a long time but not into perpetuity, or the company has long-term debt that will take many years to be fully paid off, the typical model for projecting cash flow can become very cumbersome. This article presents a simplified way of incorporating these items into the cash-flow projection, without compromising the accuracy of the analysis.