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- Which of the following cash flows should not be considered when evaluating a project? Changes in working capital Shipping and installation costs Sunk costs Opportunity costs ExternalitiesWhy should companies use a project’s cash flows rather thanaccounting income when determining a project’s NPV?Demonstrates the difference between depreciation costs as expenses and the cash flow generated by the purchase of a fixed asset? Give an example?
- how can depreciation be a cash flow?Explain why depreciation should not be included as a cost in a discounted cash flow (DCF) analysis of a project.(b) Although depreciation is not a cash flow item, it plays an important role in thecalculation of cash flow. Describe the impact of depreciation on a project’s cash flow.
- Cash flows, rather than accounting profits, are used in project analysis. Whatis the basis for this emphasis on cash flows as opposed to net income?Should you subtract interest expense or dividends when calculating project cash flow?State a method that translates a project's cash flows into an equivalent net present value?
- Why should companies use a project’s free cash flows rather than accountingincome when determining a project’s NPV?Explain how sunk costs and cannibalisation affect the determination of aninvestment’s incremental cash flows.Is after-tax cashflow still the cash inflow even if it is the sum of NOPAT and depreciation in the project?