Should financing costs such as the returns paid to bondholders ...

[beccaep]

Should financing costs such as the returns paid to bondholders and stockholders be considered in computing after-tax operating cash flows? Why or why not?
 
  What will be an ideal response?

Question 2

There is an inverse relationship between the quality or rating of a bond and the rate of return it must provide bondholders.
 
  Indicate whether the statement is true or false

[TINA]

Answer to Question 1

Financing costs are not an incremental cash flow for capital budgeting purposes. Financing costs are a direct consequence of how the project is financed, not whether the project is economically viable. Financing costs are embedded in the required rate of return used to discount project cash flows.

Answer to Question 2

TRUE