Over the life of a project, a project’s accounting earnings equal to its net cash flows Group of answer choices a) True b) False
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- Why are interest charges not deducted when a projects cash flows are calculated for use in a capital budgeting analysis?1) When converting accounting profits to cash flows, we broadly deal with depreciation and working capital as follows: Depreciation Working capital A) add add at the start of the project,deduct at the end. B) deduct add at the start of the project,deduct at the end. C) add deduct at the start of the project,add at the end. D) deduct deduct at the start of the project,add at the end.. What does each of the following definitions refer to: The comparison of the expected future streams of earnings from a project, with the immediate and subsequent streams of expenditure. All aspects of the administration of cash, accounts receivables, inventory, accounts payable, short term debt, accrued expenses, etc. The specific mixture of long-term debt and equity the firm uses to finance its operations.
- Identify if each of the following would be included or excluded in forecasting cash flows for a project. (3) Interest expense Purchase of P, P, E (fixed assets) Changes in NOWCwhich of the following should not be included in the cash flows for project analysis? Opportunity costs side effects or erosion sunk costs operating cash flows for all years The initial investment in net working capitalA financial analyst should include interest and dividend payments when calculating a project's operating cash flows (OCF). Agree/Disagree! Justify your answer.
- Which of the following statements is true with regard to cash flows resulting from financing costs? a. They should be included in the cash flow calculations. b. Financing cash flows cannot include dividend payments to stockholders and interest payments to bondholders. c. Financing costs are captured in the original investment of a project’s cash flows. d. If cash outflows associated with financing costs were deducted from the cash flows for a project, it would be double-counting the financing costs of the investment.State a method that translates a project's cash flows into an equivalent net present value?What name is given to the time value of money technique that discounts the after-tax cash flows for a project over its life to time period zero using the company’s minimum desired rate of return? a. net present value method b. capital rationing methodc. payback method d. average rate of return method e. accounting rate of return method
- Which of the following items are required to analyze a capital expenditure? (Select all that apply.) - EBIT - the initial cash outlay - evaluation of the future cash flows - the projected future cash flows from the investmentIdentification of Relevant Cash Flows what is the incremental net cash flow of a project?1. Calculate the initial cash flow of the project and the operating cash-flows for all years of the project. Formulas Project cash flow = project operating cash flow - project change in net working capital - project capital spending Operating cash flow = Earnings before interest and taxes + depreciation - taxes