Question choices:

1. on monthly basis, on an annual basis, exactly when they occur
2. a replacement, an expansion
3. a negative within-firm, a positive within firm, an enviormental

Capital budgeting analysis not only requires the evaluation of cash flows but also requires the understanding of the origin of those cash flows. Based on your understanding of cash flows in a firm, answer the following questions: Which of the following is a reason cash flows may differ from accounting income? Depreciation is a tax-deductible expense but is not a cash outlay. The total number of units sold will be different for accounting income and cash flows. Ideally, capital budgeting analysis should take cash flows into account Understanding the nature of projects Capital budgeting analysis often involves decisions related to expansion projects and/or replacement projects. Based on your understanding of expansion and replacement projects, answer the following: If a clothing store opens a second retail location on the other side of town, this project would be considered project. What are sunk costs? A successful sushi chain in Hong Kong spent $500,000 to conduct a study on whether to open a location in the United States. The study showed that the best place for the company to open their first location would be in Chicago. When conducting its capital budgeting analysis, how should the company account for the cost of the study when estimating the amount of the initial investment that the new store will require? The company should ignore it. The company should include it in the amount of the initial investment. The role of externalities A paper manufacturer has built a plant that meets all government-mandated environmental regulations, but the plant still produces an unpleasant odor when it is being operated. Many residents in the area dislike the paper mill because of these unpleasant odors. This is an example of externality