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Which of the following is true regarding project evaluation? Multiple Choice The stand-alone principle calls for...

Which of the following is true regarding project evaluation?

Multiple Choice

  • The stand-alone principle calls for evaluation of a project based on its incremental cash flows.

  • When fixed assets are sold at the project end, there are usually no tax consequences of the sale.

  • Whether straight-line depreciation or CCA is used will have no impact on project NPV.

  • Financing costs must be included in the statement of cash flows because they are not accounted for elsewhere.

  • Changes in NWC are not considered incremental cash flows.

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Answer #1

Stand alone principle calls for the evaluation of a project based upon its incremental cash flows.

The evaluation of a project which will be based solely upon the incremental cash flows which is earned due to the project will be known as stand alone principle. It will just be considering the cash flows which are related to that project. Option A is correct.

All the other options are not true subsequently.

Correct option is (A)stand-alone principal calls for evaluation of a project based on its incremental cash flows

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