Question

When evaluating a project in which a firm might invest, the timing but not the size of the cash flows is important. Select one: True False

Answer 1

Answer:- False

Timing as well as size of cash flows both are important. If the cash outflows is large and inflows are not adequate to cover the outflows in a short period of time then project is not viable. On the other hand consideration must be taken of the fact that whether cash inflows are large in the initial period or in the later period. Huge cash flows in excess of the investment or cash outflows during the life time of project indicates positive Net Present Value and therefore project is viable.