Question

Which of the following statements regarding relevant (i.e. incremental) cash flows is(are) true? I. Managers should...

Which of the following statements regarding relevant (i.e. incremental) cash flows is(are) true? I. Managers should not consider opportunity costs when making capital budgeting decisions. II. Managers should not consider sunk costs when making capital budgeting decisions. III. An externality is an effect of a project on the firm that is not reflected in the project’s cash flows.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Ans II. Managers should not consider sunk costs when making capital budgeting decisions. III. An externality is an effect of a project on the firm that is not reflected in the project’s cash flows.

I. Managers should not consider opportunity costs when making capital budgeting decisions. FALSE

II. Managers should not consider sunk costs when making capital budgeting decisions. TRUE

III. An externality is an effect of a project on the firm that is not reflected in the project’s cash flows. TRUE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following statements is/are correct? Since depreciation is not a cash expense, it has...
Which of the following statements is/are correct? Since depreciation is not a cash expense, it has no effect on FCF thus no effect on capital budgeting. (this is not the answer, I got marked off). Externality can be either negative or positive factor when estimating FCF. If sunk costs are considered and reflected in a project’s cash flows, then the project’s NPV will be higher thus sunk cost should be included. The inclusion of an externality can never be lead...
Which of the following statements is incorrect? Group of answer choices We should take into account...
Which of the following statements is incorrect? Group of answer choices We should take into account of opportunity costs. Only incremental cash flows are relevant to the accept/reject decision. Capital budgeting decisions is based on accounting earnings. Sunk costs should never be considered.
Which of the following statements regarding cash flow is correct? Multiple Choice Cash flow measures changes...
Which of the following statements regarding cash flow is correct? Multiple Choice Cash flow measures changes in the firm's cash account. After-tax cash flow is usually identical to accounting profits when accrual accounting is used for financial statement purposes. In evaluating capital budgeting decisions, cash flows should be valued on a pre-tax basis for consistency's sake. Incremental cash flows should include opportunity costs but ignore sunk costs. Cash flow should be recognized only when it has accrued according to GAAP...
Which of the following should you NOT consider as relevant cash flow (flows) when considering the...
Which of the following should you NOT consider as relevant cash flow (flows) when considering the merit of a project? Interest costs that will occur if the project is financed by debt Opportunity costs The cost of a feasibility study that will be paid regardless of the project being undertaken or not i and ii i and iii ii and iii i, ii and iii
Which of the following statements is most correct? Question 5 options: Sunk costs should be incorporated...
Which of the following statements is most correct? Question 5 options: Sunk costs should be incorporated into capital budgeting decisions. Opportunity costs should be incorporated into capital budgeting decisions. Relevant externalities should be incorporated into capital budgeting decisions. The rate of depreciation will not affect after-tax operating cash flows, since depreciation is not a cash expense. Answers b and c are correct.
4. Relevant cash flows Which of the following are cash flows that Davis Company forgoes as...
4. Relevant cash flows Which of the following are cash flows that Davis Company forgoes as a result of accepting the project under consideration? (In general, these are the cash flows of the next-best alternative to the project.) - Opportunity costs - An externality - Sunk costs Which of the following factors should Davis Company include in its capital budgeting analysis? Check all that apply. -Davis’s forecasted cash flows are expressed on an after-tax, as opposed to pre-tax, basis. -Davis...
Any incremental cash flow is relevant in a capital budgeting project analysis including incremental cash flows...
Any incremental cash flow is relevant in a capital budgeting project analysis including incremental cash flows associated with existing projects.
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the...
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the past and doesn’t affect decision making. A relevant cost differs between alternatives and is used in decision making. b. A relevant cost occurred in the past and doesn’t affect decision making. A sunk cost differs between alternatives and is used in decision making. c. Both costs are used is decision making. d. Neither cost is used in decision making. What is true of opportunity...
Consider the following statements about taxes and after-tax cash flows: I. Capital budgeting analyses should incorporate...
Consider the following statements about taxes and after-tax cash flows: I. Capital budgeting analyses should incorporate after-tax cash flows rather than before-tax cash flows. II. Added company revenues will result in lower taxes for a firm. III. Operating expenses may actually provide a tax benefit for an organization. Which of the above statements is (are) correct? Select one: a. I and II. b. I and III. c. I only. d. III only. e. II only.
Which of the following should a financial manager consider when analyzing a capital budgeting project? I....
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
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT