7. Which of the following should be included in an analysis of a new project's cash...
7. Which of the following should be included in an analysis of a new project's cash flows?
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7. Which of the following should be included in an analysis of a
new project's cash...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: O Changes in net working capital associated with the project The project's financing costs The project's depreciation expense The project's fixed-asset expenditures Indirect cash flows often affect a firm's capital budgeting decisions. However, some of these indirect cash flows are...
3. Identifying incremental cash flows Aa Aa E When firms make capital budgeting decisions, they should...
3. Identifying incremental cash flows Aa Aa E When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's fixed-asset expenditures Changes in net working capital associated with the project The project's depreciation expense The project's financing costs Indirect cash flows often affect a firm's capital budgeting decisions. However,...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's financing costs The project's depreciation expense Changes in net working capital associated with the project The project's fixed-asset expenditures O Indirect cash flows often affect a firm's capital budgeting decisions. However, some of these indirect cash flows are...
Which of the following should NOT be included in a capital budgeting analysis? a. Changes in...
Which of the following should NOT be included in a capital budgeting analysis? a. Changes in existing toothpaste sales as a result of new, innovative, toothpaste. b. The opportunity cost of being able to sell a parcel of land instead of building a new project on the same piece of land. c. Research and development costs that are applied to all projects, even though the project does not require R&D. d. Shipping and installation costs.
Ch 13: Assignment - Capital Budgeting: Estimating Cash 3. Identifying incremental cash flows When firms make...
Ch 13: Assignment - Capital Budgeting: Estimating Cash 3. Identifying incremental cash flows When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's depreciation expense The project's fixed-asset expenditures The project's financing costs Changes in net working capital associated with the project Indirect cash flows often affect a...
To increase productive capacity, a company is considering a proposed new plant. Which of the following...
To increase productive capacity, a company is considering a proposed new plant. Which of the following statements is CORRECT? a. Since depreciation is a non-cash expense, the firm does not need to deal with depreciation when calculating the operating cash flows. b. In calculating the project's operating cash flows, the firm should not deduct financing costs such as interest expense, because financing costs are accounted for by discounting at the cost of capital. If interest were deducted when estimating cash...
Which of the following statements is CORRECT? a. When evaluating corporate projects it is important to...
Which of the following statements is CORRECT? a. When evaluating corporate projects it is important to exclude all opportunity costs. b. Interest expense should be included in project cash flows. c. In a replacement analysis, we should only focus on the cash flows related to the new machinery. d. The rate of depreciation will often affect operating cash flows, even though depreciation is not a cash expense. e. Under the scenario of a cannibalization effect where the new business eats...
Question 7 (10 marks] 7.1. 7.2. Operating cash flows, rather than accounting profits, are used in project analysis. Wha...
Question 7 (10 marks] 7.1. 7.2. Operating cash flows, rather than accounting profits, are used in project analysis. What is the basis for this emphasis on cash flows as opposed to net income? (4) Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward? (2) Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. 7.3.
7. Problem 12.09 (New Project Analysis) eBook You must evaluate a proposal to buy a new...
7. Problem 12.09 (New Project Analysis) eBook You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $174,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $70,000. The machine would require a $6,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but...
Which of the following is a basic principle when estimating a project's cash flows? Cash flows...
Which of the following is a basic principle when estimating a project's cash flows? Cash flows should be measured on a pretax basis accounting for the risk of individual projects Cash flows should ignore depreciation because it is a noncash charge Only direct effects of a project should be included in cash flow calculations Cash flows should be measured on an incremental basis D 4. In estimating the net investment, an outlay that has already been made is known as...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: O Changes in net working capital associated with the project The project's financing costs The project's depreciation expense The project's fixed-asset expenditures Indirect cash flows often affect a firm's capital budgeting decisions. However, some of these indirect cash flows are...
3. Identifying incremental cash flows Aa Aa E When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's fixed-asset expenditures Changes in net working capital associated with the project The project's depreciation expense The project's financing costs Indirect cash flows often affect a firm's capital budgeting decisions. However,...
When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's financing costs The project's depreciation expense Changes in net working capital associated with the project The project's fixed-asset expenditures O Indirect cash flows often affect a firm's capital budgeting decisions. However, some of these indirect cash flows are...
Ch 13: Assignment - Capital Budgeting: Estimating Cash 3. Identifying incremental cash flows When firms make capital budgeting decisions, they should concern themselves with incremental cash flows, not net income, when evaluating projects. To determine the incremental cash flows associated with a capital project, an analyst should include all of the following except: The project's depreciation expense The project's fixed-asset expenditures The project's financing costs Changes in net working capital associated with the project Indirect cash flows often affect a...
Question 7 (10 marks] 7.1. 7.2. Operating cash flows, rather than accounting profits, are used in project analysis. What is the basis for this emphasis on cash flows as opposed to net income? (4) Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward? (2) Explain why sunk costs should not be included in a capital budgeting analysis but opportunity costs and externalities should be included. 7.3.
7. Problem 12.09 (New Project Analysis) eBook You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $174,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $70,000. The machine would require a $6,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but...
Which of the following is a basic principle when estimating a project's cash flows? Cash flows should be measured on a pretax basis accounting for the risk of individual projects Cash flows should ignore depreciation because it is a noncash charge Only direct effects of a project should be included in cash flow calculations Cash flows should be measured on an incremental basis D 4. In estimating the net investment, an outlay that has already been made is known as...
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