1. Questions are to be attempted prior to attending tutorial Depreciation is not a cash flow item so it can be totally ignored in a capital budgeting analysis. True or False? Explain.
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- Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions. a. the inclusion of opportunity costs b. erosion c. errors in projected cash flows d. the exclusion of sunk costs e. net working capital costsWhich of the following is NOTa relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? a. Shipping and installation costs. b. Cannibalization effects. c. Opportunity costs. d. Sunk costs that have been expensed for tax purposes. e. Changes in net working capital. Please explain your answer for better understanding.Sophisticated capital budgeting techniques do not A. examine the size of the initial outlay. B. use net profits as a measure of return. C. explicitly consider the time value of money. D. take into account an unconventional cash flow pattern.
- Explain why depreciation should not be included as a cost in a discounted cash flow (DCF) analysis of a project.Risk in capital budgeting implies that the decision maker knows _ of the cash flows. A. Variability B. Certainity C. Probability D. None of theseA. Using AW, determine whether this proposal is acceptable. B. What is the ERR of this proposal? Is it acceptable? C. What is the IRR of this proposal? Is it acceptable? Show the cash flow diagram if necessary and complete solution. Do not use excel please. Thank you.
- Which of the following statement is true? O a. Sunk cost is not relevant in capital budgeting decision O b. Capital budgeting decisions are based on past OC. Capital budgeting decisions are short term in nature O d. Capital Budgeting decisions can be changed anytime5) ncome statement helps to ascertain the ________________ of the concern. a. Cash flow b. Gross Profit c. None of the Options d. Capital budgetingIn capital budgeting, incremental cash flows are least likely to consider: interest costs O No answer text provided. O externalities O opportunity costs
- In capital budgeting, one advantage of the internal rate of return is that it does not require the estimation of the weighted average cost of capital. Your answer must begin with True or False followed by your explanation.Which of the following is not a reason for risk and uncertainty in capital budgeting? a. Decisions are based on expected cash flows b. All decisions are based on forecasts c. Decisions are based on past cash flows d. All forecasts are subject to uncertainty Clear my choiceRisk in capital budgeting implies that the decision maker knows _ of the cash flows. Fill in the blanks with correct option. A. Variability B. Certainity C. Probability D. None of these