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true or false The main components needed to estimate a projects incremental cash flows are the initial capital investment, the change in NWC, net income
true or false
- The main components needed to estimate a projects incremental cash flows are the initial capital investment, the change in NWC, net income and the firms market share.
- Use of a firmsexisting assets in a proposed project would result in an erosion cost.
- Working capital accounts typically go up at the beginning of a project and are then decreased later.
- Temples payment of $1M to an architectural firm for a feasibility study of a new football stadium is an example of a sunk cost.
- Straight-linedepreciation is higher in the later years of a projectslife
- The market value of a long-termasset at any point in time is equal to the assetsoriginal cost plus all of the depreciation that has been taken on that asset.
- Sale of a piece of equipment at a gain reduces the CF from salvage
- The installation cost is added to the accumulated depreciation of an asset to get the initial capital investment.
- Cogswell Cola needed to purchase additional inventory of plastic bottles to launch its Pulsar Cola. This decrease in inventory represents a positive cash flow associated with the project.
- Opportunity costs add to a projectscash flows while erosion costs and synergy gains reduce those cash flows.
- Opportunity costs have no impact on a projectsincremental CFs.
- If the company had a large depreciation expense during the period,the income statement could show a loss for the period,even though the cash account may have grown during the same period.
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