Author Question: Which of the following statements is correct? (Read 69 times)

M1ch3a · **on:** Aug 7, 2023

Which of the following statements is correct?

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Only incremental cash flows are relevant in project analysis, and the proper incremental cash flows are the reported accounting profits, which form the best basis for investor and managerial decisions.

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If a terminal loss or CCA recapture could occur at the conclusion of the business, no subsequent cash flows would be received.

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It is unrealistic to believe that increases in net operating working capital required at the start of an expansion project can be recovered at the project’s completion. Working capital like inventory is almost always used up in operations.

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Changes in net operating working capital refer to changes in current assets and current liabilities, not to changes in long-term assets and liabilities, hence they are not considered in a capital budgeting analysis.

zubair1583 · **Reply #1 on:** Aug 7, 2023

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