Question

Which of the following should a financial manager consider when analyzing a capital budgeting project?

I. project start up costs
II. timing of all projected cash flows
III. dependability of future cash flows
IV. dollar amount of each projected cash flow

choices:

I and IV only

II, III, and IV only

I, II, III, and IV

I, II, and IV only

I, II, and III only

Answer 1

In a capital budgeting project, the cash flows are analyzed to determine whether project is acceptable.

The cash flows include the initial investment and the subsequent cash flows.

The timing of cash flows is also important because money has time value.

The dependability of cash flows is also important because the probability/certainty of the cash flow's occurrence affects the project's expected cash flows, and thus its acceptability.

Therefore, the correct answer is :

I, II, III, and IV

All of the factors should be considered