In capital budgeting analysis, how does one reflect the financing (i.e. debt/equity) of the project?

in the cost of capital

in the initial outlay

in the incremental cash flows

Financing should be reflected in all of these ways (initial outlay, incremental cash flows, cost of capital)

In capital budgeting analysis, the terminal value is usually both the most risky estimate and the most determinant (i.e. the terminal value will drive the accept/reject decision).

1. True
2. false

In capital budgeting analysis, one must be careful not to include depreciation expense, as it is non-cash.

1. True
2. false

When estimating cash flows for capital budgeting projects, consider all of the following EXCEPT:

financing costs

externalities

opportunity costs

installation costs

capital gains or losses on the equipment being replaced

Which is generally the LEAST risky type of capital project?

replacement

expansion

new venture

not enough information to determine