Which of the Following Would Be Considered Relevant Cash Flows

question 114

Multiple Choice

Which of the following would be considered relevant cash flows in a capital budgeting evaluation?

• A) I, II, and III.
• B) I, II, and IV.
• C) I, III, and IV.
• D) I, II, III, and IV.
• I.Increased after-tax income.
• II.Tax savings due to increased depreciation expense.
• III.Increased expenditures on inventory for the new project.
• IV.Benefits that accrue to the local community.

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Definitions:

Present Value

The present worth of a future amount of money, or sequence of cash flows, taking into account a certain return rate, employed in discounting to evaluate investment prospects.

Interest Factor

A multiplier used to calculate the total interest that will accrue on an investment or loan based on the interest rate and time period.

Calculated

The result of mathematically determining a number or value through a prescribed process or formula.

Higher Risk

A condition or scenario involving a greater probability of loss or less certainty of returns, typically demanding a higher risk premium.