Question
3. Why should sunk costs not be included in a capital budgeting analysis and what can go wrong if it is included? 4. How do
3. Why should sunk costs not be included in a capital budgeting analysis and what can go wrong if it is included?
4. How do accountants show fixed asset purchases and how is this different from what is done to compute the project cash flows?
6. When estimating net cash flows for projects, should interest and dividends be included? Why or why not?
9. What effect does net operating working capital have on cash flows?
10. What are the 3 ways to properly conduct an analysis when estimating project cash flows?
11. What is the risk associated with not including inflation in capital budgeting calculations?
12. How do free cash flows differ from accounting income and which of these is relevant for capital budgeting purposes?
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