1.
The project's financing costs
2.
We should include i.e., not ignore
3.
Cannibalization, Include in the Analysis
4.
Opportunity Cost, Include in the Analysis
5.
Sunk Cost
6.
Change in NWC, Include in the Analysis
7.
Opportunity Cost, Include in the Analysis
8.
No
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 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,...
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...
Capital budgeting analysis not only requires the evaluation of cash flows but also requires the understanding of the origin of those cash flows. Based on your understanding of cash flows in a firm, complete and answer the following questions: The present value of cash flows can be used to determine the basis of a firm's value Ideally, capital budgeting analysis should take cash flows into account on a monthly basis on an annual basis exactly when they occur Understanding the...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing expenses Q sunk costs opportunity costs | Question 2 2 pts The cash flows that occur just because of a new project are called O marginal cash flows o project cash flos e additional cash flows O incremental cash flows 2 pts D | Question 3 Sun Corp. uses a discount rate of 6% for below-average risk projects, 8% for average-risk projects, and 10%...
2. The basic process and rules for capital budgeting Aa Aa The capital budgeting process consists of the following activities: I. Estimating the relevant cash flows II. Reviewing a project's post-implementation and post-termination performance III. Evaluating alternatives and selecting the projects to be implemented IV. Generating capital investment project proposals What is the correct sequence for these activities? O IV, II, III, I O I, IV, II, III There are several practical aspects of capital budgeting that complicate what appears...
h 11: Assignment - The Basics of Capital Budgeting 1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows:...
The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project's cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Happy Dog Soap Company is considering investing $2,500,000 in a project that is expected to generate the following net cash flows: Happy Dog Soap Company uses a WACC of 9% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this project's PI (rounded...
1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions Consider this case: Suppose Pheasant Pharmaceuticals is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4...
QUESTION 2 Depreciation must be considered when evaluating the incremental operating cash flows associated with a capital budgeting project because: A. it represents a tax-deductible cash expense. B. the firm has a cash outflow equal to the depreciation expense each year. C. depreciation is a cash flow that doesn't change. D. depreciation has an impact on the taxes paid by the firm, which is a cash flow. E. depreciation is a sunk cost. QUESTION 3 Diversifiable risk includes _____. A....