Homework Answers
The basic principle is
Cash flows should be measured on an incremental basis
Direct as well as indirect effects are included
Cash flows are taken on after tax basis
4.The answer is Sunk cost
Cost already incurred and hence, irrelevant is known as Sunk cost
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Which of the following is a basic principle when estimating a project's cash flows? Cash flows...
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...
D l Question 1 When calculating incremental cash flows, we should include O interest O financing...
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%...
1. When determining relevant cash flows for project evaluation, we should _____. a. discount interest expenses...
1. When determining relevant cash flows for project evaluation, we should _____. a. discount interest expenses to the present b. subtract interest expenses from EBIT c. ignore interest expenses d. add back in interest expenses after subracting taxes 2. When calculating incremental cash flows, we should exclude _____. a. side effects b. taxes c. opportunity costs d. sunk costs 3. When calculating incremental cash flows, we should include _____. a. interest b. sunk costs c. financing expenses d. opportunity costs...
A company is considering a proposed expansion to its facilities. Which of the following statements is...
A company is considering a proposed expansion to its facilities. Which of the following statements is most correct? In calculating the project's operating cash flows, the firm should not subtract out financing costs such as interest expense, since these costs are already included in the WACC, which is used to discount the project’s net cash flows. Since depreciation is a non-cash expense, the firm does not need to know the depreciation rate when calculating the operating cash flows....
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...
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,...
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...
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? A) all sunk costs B) any sales from existing products that would be lost if customers were expected to purchase a new product instead C) all financing costs D) no opportunity costs
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...
Projects are often classified based on the type of capital expenditure. All of the following are...
Projects are often classified based on the type of capital expenditure. All of the following are classifications EXCEPT projects generated By growth opportunities By cost reduction opportunities To meet legal requirements and health and safety standards To meet the needs of customers 10. A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive...
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...
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%...
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...
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: 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...
Projects are often classified based on the type of capital expenditure. All of the following are classifications EXCEPT projects generated By growth opportunities By cost reduction opportunities To meet legal requirements and health and safety standards To meet the needs of customers 10. A poker player calls a large bet early in the hand and another large bet later in the hand. At the end of the hand, her opponent makes a small bet. The poker player is almost positive...
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