Topic 5

Question 1

Sunk costs is a cost that has already been _____ and cannot be _______# incremental cash flow.

Answer 1

incurred, removed

Question 2

The incremental cash flows for project evaluation consist of any and all _______in the firm’s _____cash flows that are a direct consequence of undertaking the project.

Answer 2

changes, future

Question 3

The stand-alone principle is the _______of a project based on the project’s ________cash flows.

Answer 3

evaluation, incremental

Question 4

Opportunity costs are the most valuable alternative that is given up if a particular investment is undertaken = ______ _______ _______.

Answer 4

incremental cash flow

Question 5

Side effects -> erosion -> the cash flows of a ____ project that come at the expense of a firm’s existing projects = incremental cash flow.

Answer 5

new

Question 6

Financing costs -> _____ ______ ______ used to discount the cash flows reflects, in part, the financing costs of the project = incremental cash flow.

Answer 6

the interest rate

Question 7

An investment of the firm in the project’s ____ ______ ______ represents an additional cost of undertaking the investment.

Answer 7

net working capital

Question 8

Always use _____ ______ _____ ______ , since taxes are definitely a cash flow.

Answer 8

after-tax incremental cash flow