Which of the Following Is a Basic Principle When Estimating

question 5

Multiple Choice

Which of the following is a basic principle when estimating a project's cash flows?

• A)cash flows should be measured on a pretax basis
• B)cash flows should ignore depreciation because it is a non-cash charge
• C)only direct effects of a project should be included in cash flow calculations
• D)cash flows should be measured on an incremental basis

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Definitions:

Translation Exposure

The potential for a company's financial statements to be affected by changes in exchange rates when foreign operations are translated into the parent company's currency.

Exchange Rates

The value of one currency for the purpose of conversion to another.

Purchasing Power

The buying power of a currency, measured by how many goods or services can be acquired with a single unit of that currency.

Imports And Exports

The act of bringing goods and services into one country from another (imports) and sending goods or services from one country to another (exports).