Which of the following statements are true?I. To measure relevant project cash flows, the analyst take the difference between “doing” vs. “not doing” a projectII. Depreciation is a non-cash item, but it saves cash taxesIII. Use the average of historical cash flows from similar past projects instead of estimating future cash flowsIV. Include salvage (or terminal) values that recover the initial investmentI and II onlyII and III onlyI, II and IV onlyI and IV onlyAll of the statements are true

Which of the following statements is FALSE?Group of answer choicesAs a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.When evaluating a capital budgeting decision, we generally include interest expense.The decision to continue or abandon a project should be based only on the incremental costs and benefits of the project going forward.Earnings are not cash flows.

Which of the following may not generally result in underestimation of project cash flows?(1 Point)Under estimation of project cost of capitalUnder estimation of salvage valuesIgnoring intangible benefitsOverlooking the value of future options

Which of the following statements is FALSE? A.Many projects use a resource that the company already owns. B.When evaluating a capital budgeting decision, we generally include interest expense. C.Only include as incremental expenses in your capital budgeting analysis the additional overhead expenses that arise because of the decision to take on the project. D.As a practical matter, to derive the forecasted cash flows of a project, financial managers often begin by forecasting earnings.

Which one of the following statements is true?Sales on credit, or accounts receivable increase cash flowCurrent liabilities, including a bank loan decrease cash flowThe salvage value generates cash from selling an existing asset todayOpportunity costs include assets owned by the firm that could be sold if a project is not undertakenBonds represent a source of operating cash flow

Which one of the following statements is true?Accounting profit and cash flow are the same thingAll else equal, an increase in the tax rate, increases the value of depreciation tax-savingsInvestments in net working capital are examples of sunk costsOperating costs are part of opportunity costsIf the same amount of net working capital is recovered at the end of the project as was invested initially, than its impact on NPV is positive because the discount rate used is positive