Question

Which of the following should be included in the capital budgeting decision

Select one:

A. Sunk costs

B. Opportunity costs

C. Relevant externalities

D. #2 and #3 should be included

E. All of the above should be included

Which of the following is NOT correct

Select one:

A. If an investment project would make use of land which the firm already owns, the opportunity cost of the land is a relevant cash flow and should be included with other project cash flows

B. Analysis of capital projects focuses on cash flows rather than accounting income

C. Changes in working capital do not need to be considered in capital project analysis

D. All of the above are correct

Stock dividends

Select one:

A. are similar to stock splits in that they do not change the fundamental position of current shareholders

B. must be accompanied by cash dividends

C. are viewed unfavorably by investors and thus should not be used

D. have the same effect on financial statements as cash dividends

A project has initial costs of $5,000 and subsequent cash inflows of $1800, 1275, 1875, and 1525. The company's cost of capital is 10%. Calculate the Payback Period for the project

Select one:

A. 2.83 years

B. 3.03 years

C. 3.33 years

D. 4.00 years