What Are Some of the Important Points to Remember While

question 35

Essay

What are some of the important points to remember while estimating the cash flows of a project?
Estimate after-tax cash flows on an incremental basis.
Include all incidental effects.
Include working capital requirements.
Include opportunity costs.
Do not include sunk costs.
Take inflation into consideration in a consistent manner.

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Definitions:

Interest Income

The revenue earned from deposit accounts or investments through the receipt of interest payments.

Fair Value Option

An accounting strategy that allows companies to measure and report certain financial assets and liabilities at their fair values.

Long-term Notes Receivable

Loans or credit extended to others that are not expected to be repaid within the next twelve months, reported as long-term assets on the balance sheet.

Fair Value

The price that would be received for selling an asset or paid for transferring a liability in an orderly transaction between market participants at the measurement date.