Why should companies use a project’s free cash flows rather than accountingincome when determining a project’s NPV?

Q: True or False In the net present value method, market research costs incurred in the past should be…

A: An investment appraisal depicts a financial analysis of a capital project that requires a huge…

Q: Should you subtract interest expense or dividends when calculating project cash flow?

A: It is one of the principal expenses found in the income statement. An organization must fund its…

Q: Explain why depreciation and interest should not be included as costs in a discounted cash flow…

A: The company makes several investments and an evaluation of investment is necessary. Therefore, the…

Q: Describe how NPV is calculated and describe the information this measure provides about a sequence…

A: NPV net present value is very important factor in deciding the feasibility analysis of projects. It…

Q: Under the indirect method of estimating project cash flows, an increase in trade creditors in a…

A: Cash flow statement is divided into three activities i.e. cash flow from operating activities, cash…

Q: Why does capital budgeting rely on the analysis of cash flows rather than on net income

A: Capital budgeting : Capital project is a major expenditure that’s required to purchase a machinery…

Q: how a failed capital project may shape the future strategy of investment capital.

A: Introduction: Capital projects are nothing but a long term capital intensive initiative aimed at…

Q: What would your process be to ensure tha

A: Accelerated depreciation is a type of depreciation used for accounting or income tax purposes that…

Q: How can we easily automate the process of computing the net present worthof any project cash flow…

A: Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: One method for calculating enterprise value includes the present value of which of the following…

A: Enterprise value : total value of the company that shows how much will it cost to buy the firm.

Q: Why the payback method is often considered inferior to discounted cash flow in capital investment…

A: Payback period is capital budgeting technique which tells how much time will it take for Ann…

Q: Would research and development and marketing be working capital? Can we take operating profit and…

A: Hello. Since your question has multiple parts, we will solve the first question for you. If you want…

Q: which of the following should not be included in the cash flows for project analysis?…

A: Meaning of the given options: Opportunity cost : It is the benefit foregone from not selecting the…

Q: Why is it not always possible for the cash borrowed (released) from a project to be reinvested to…

A: We need to use the concept of capital budgeting and internal rate of return to answer the question.

Q: How can we determine after-tax cash flows for an investmenta project with only operating and…

A: Discount rate is the weighted average cost of capital (WACC) which is used in the project.  WACC is…

Q: Which of the following should NOT be included in the cash flows for project analysis? Opportunity…

A: Explanation of the given option: 1. opportunity cost : It is the cost to be borne for not choosing…

Q: Cash inflow from the project not cash flows

A: Solution:- Cash inflow each year from the project means the net flow of cash which we get each year…

Q: What would be a business example that shows how depreciation and accelerated depreciation can affect…

A: Depreciation- is a method used by a business or company to write off an asset's value over it's…

Q: Discuss the notions of conventional and nonconventional cash flows in capital budgeting. Which…

A: Conventional Cash Flows: These are cash flows in a project where the pattern of initial investment…

Q: Cash flows, rather than accounting profits, are used in project analysis. Whatis the basis for this…

A: The term cash flows refer to cash & cash equivalents that is being transferred in & out of…

Q: Why are interest charges not deducted when a project’s cash flows are calculated for use in a…

A: Capital budgeting analysis is useful to know which projects are profitable and which are not. There…

Q: (c) Why is net present value considered to be a superior method of evaluating the cash flows from a…

A: The concepts of capital budgeting tools can be used here to answer the questions. There are…

Q: entify if each of the following would be included or excluded in forecasting cash flows for a…

A: When forecasting future cash flows only those cash flows, which will incur in future [ incremental ]…

Q: What is the procedure of developing Project Cash Flow Statements?

A: Cash flow is the amount of liquid cash that flows in and out of the company in a particular…

Q: 6. Which of the following is NOT a relevant cash flow and thus should NOT be reflected in the…

A: Before choosing from the different alternatives, company has to take decision on the basis of cost…

Q: If depreciation is not a cash flow item, why does it affect the level of cash flows from a project…

A: The term depreciation refers to the process of systematically allocating the cost of a fixed asset…

Q: State a method that translates a project's cash flows into an equivalent net present value?

A: Both investment and finance decisions are made with the primary purpose of increasing shareholder…

Q: Is after-tax cashflow still the cash inflow even if it is the sum of NOPAT and depreciation in the…

A: Cash Inflow of Project: The amount of money that enters a firm is referred to as cash influx. Sales,…

Q: How do we develop the project cash flows, after taxes, over the life of the project?

A: Cash flows of the project include both cash inflows and cash outflows. To develop cash flows…

Q: Concerning incremental project cash flow, this is a cost one would never count as a cash flow of the…

A: The increased operating cash flow that a company obtains as a result of taking on a new project is…

Q: Explain why depreciation should not be included as a cost in a discounted cash flow (DCF) analysis…

A: Hi, Thanks for posting the question. As per the Q&A guidelines of Bartleby, suppose to answer…

Q: Why should companies use a project’s cash flows rather thanaccounting income when determining a…

A: Net Present Value is the difference between the current value of cash inflow and cash outflow for a…

Q: h expense

A: Depreciation definition : In simple words, depreciation refers to the expense of an organisation…

Q: If we compare two mutually exclusive projects using __________ problems can arise if the projects'…

A: If we compare two mutually exclusive projects using Pay back period method problems can arise if the…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.