Question
The business press is filled with examples of mistakes made by businesses related to estimating the cash flows related to capital budgeting projects. For example,
The business press is filled with examples of mistakes made by businesses related to estimating the cash flows related to capital budgeting projects. For example, Tesla "squeezing" its suppliers for discounts and/or delays in payment could be example of a failure to estimate the working capital needed to ramp up production of its new car line. The chapter mentions several areas where businesses need to be careful. Some of these areas are; to use incremental rather than average cash flows, forgetting to include incidental effects or embedded growth options, forgetting opportunity cost related to the cost of the project, inappropriately including sunk cost in the analysis, using an incorrect overhead allocation, not including the salvage or residual value in the cash flows. Please either state a real life example of one of these that has played out in the press (you can leave the name of the company off if you wish) or describe in detail an example of where you might see this (please do not use the examples given in the text. Thanks.
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