Which of the following cash flows are added to the present value of operating cash flows to make a cost-cutting decision? More than one answer may be correct. Multiple select question. The present value of net working capital recovered at the end of the project The present value of net working capital invested The present value of depreciation tax shields The present value of initial investment

Which of the following cash flows are added to the present value of operating cash flows to make a cost-cutting decision? More than one answer may be correct. Multiple select question. The present value of net working capital recovered at the end of the project The present value of net working capital invested The present value of depreciation tax shields The present value of initial investment

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 7Q: Why are interest charges not deducted when a projects cash flows are calculated for use in a capital...

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Why are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?
which of the following should not be included in the cash flows for project analysis? Opportunity costs side effects or erosion sunk costs operating cash flows for all years The initial investment in net working capital
Which of the following cash flows are not considered in the calculation of the annual cash-flow for a capital investment proposal? Incremental costs. O Taxes. O Depreciation on the project. Proceeds from selling an old asset which is being replaced by a new asset. Change in revenue.
The AW of a project can be estimated by reducing all cash flows including the capital investment, salvage value in terms of annualized cash flows at an interest rate( i). Select one: True False
What name is given to the time value of money technique that discounts the after-tax cash flows for a project over its life to time period zero using the company’s minimum desired rate of return? a. net present value method b. capital rationing methodc. payback method d. average rate of return method e. accounting rate of return method
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 Externalities
1. Define capital expenditures and provide examples of capital expenditures.2. Cash flows for a particular project should be measured on an incremental basis. What does that mean?3. How does the opportunity cost concept affect capital budgeting cash flow determination?4. What factors should be considered when estimating a new business’ NINV? Is it any different for an asset replacement project. 5. Why is depreciation, a noncash expense, considered when estimating a project’s net cash flows?6. What are the potential tax consequences of selling an old asset in an asset replacement investment decision?
Which of the following is NOTa relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? a. Shipping and installation costs. b. Cannibalization effects. c. Opportunity costs. d. Sunk costs that have been expensed for tax purposes. e. Changes in net working capital. Please explain your answer for better understanding.
Which methods of evaluating a capital investment project ignore the time value of money? Multiple Choice Net present volue and accounting rate of retum, Accounting rate of return and internal rate of return. Internal rate of return and payback perlod.
The operating cash flows of a project: includes tax. none of the others is correct are equal to the project's total projected net income. decrease when net working capital increases. are unaffected by the depreciation method selected.
A characteristic of the payback method is that it: (See your Chapter 25 notes, page 9) Uses accrual accounting inflows in the numerator of the calculation Uses the estimated expected useful life of the asset in the denominator of the calculation Incorporates cash flows received after the payback period has been reached Is based on accounting income Incorporates the time value of money Ignores total project profitability
Which of the following is an advantage of using the payback period method for project selection? The payback period method considers the time value of money The payback period method considers accounting income The payback period method shows when funds will be available for reinvestment The payback period method ignores the time value of money