Which of the Following Statements Concerning Cash Flow Evaluation in Capital

question 39

Multiple Choice

Which of the following statements concerning cash flow evaluation in capital budgeting is correct?

• A)When determining a project's terminal cash flows, it is generally assumed that the firm's operations do not return to the same level as they were before the project was purchased.
• B)Even though it is a noncash expense, a capital budgeting project's depreciation expense must be computed because it affects the after-tax cash flows of the project.
• C)The relevant marginal cash flows associated with a project include depreciation, because it is an annual operating expense that requires a cash payment.
• D)Shipping and installation charges are deducted from the purchase price of an asset to compute its depreciable basis.
• E)The sunk costs associated with an investment proposal are relevant cash flows for capital budgeting analysis that should be included in the computation of the project's initial investment outlay.

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