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project cash flows, interest, payback period, capital invest

When calculating the cash flows for a project, you should include sunk costs.
True
False

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When calculating the cash flows for a project, you should include interest expenses.

True
False
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One strength of the payback period is that it takes fully into account the time factor in the value of money.

True
False

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Among the reasons many firms use the payback period as a guideline in capital investment decisions are all of the following EXCEPT

a-it gives an implicit consideration to the timing of cash flows.
b- it recognizes cash flows which occur after the payback period.
c- it is a measure of risk exposure.
d-it is easy to calculate.
e-it's simple to explain the results

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_____ projects have the same function; the acceptance of one __________ the others from consideration

a- Capital; eliminates
b- Independent; does not eliminate
c- Mutually exclusive; eliminates
d- Replacement; does not eliminate

Solution Preview

When calculating the cash flows for a project, you should include sunk costs.
True
False

False. Sunk costs remain the same whether or not you accept the project.

When calculating the cash flows for a project, you should include interest expenses.
True
False

True.

One ...

Solution Summary

This solution is comprised of a detailed explanation to answer project cash flows, interest, payback period, capital investment decisions problems.

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