Question

Which of the following should a financial manager consider when analyzing a capital budgeting project? I. Project start-up costs. II. Timing of all projected cash flows. III. Dependability of future cash flows. IV. Dollar amount of each projected cash flow. A. I, II, and III only B. II, III, and IV only C. I, II, and IV only D. I, II, III, and IV E. I and IV only

Answer 1

Correct option is D. I, II, III, and IV

Step-by-step explanation:

Whenever a financial manager is to analyse a capital budgeting project, then the following is to be considered:

Start up costs - As this is the initial cash outlay the company has to make for starting the project.

Timing of projected cash flows - This is important to consider as most of the methods IRR, or NPV or discounted payback period considers the time period of cash flows for discounting them.

Dependability of future cash flows - This s important as with respect to probability of occurrence of such cash flows.

Dollar amount of each cash flow - This is considered as this is the value to be discounted or to be considered as it is without discount.

Therefore correct option is D. I, II, III, and IV