Question

I always tell my students that the hardest part of capital budgeting is estimating future cash flows, why is that

Answer 1

Capital budgeting is based on cash flows that are adjusted for the time value of money. In one word dollar received in the future is less valuable than a dollar received in the present. So, calculations such as the internal rate of return, net present value, and excess present value include adjustments for the time value of money into the cash flows which is a very hard job.
It is the most difficult job to estimate the cash flows because it needs proper forecasting. All costs that may be associated with a certain project or investment is very tuff to predict as in long run costs can increase or decrease.