Question

In evaluating projects or capital decision in finance, some things you have to consider are ______________ [select all that apply]

Group of answer choices

1. Standalone Principle

2. Sunk Costs

3. Opportunity Costs

4. Relevant cash flows

Answer 1

In evaluating projects or capital decision in finance, you have to consider the Standalone Principle, Sunk Costs, Opportunity Costs, and Relevant Cash Flows.

Step-by-step explanation:

In evaluating projects or capital decision in finance, some things you have to consider are:

1. Standalone Principle: This principle states that a project's evaluation should be based on its incremental cash flows and not on the existing projects of the firm.
2. Sunk Costs: Sunk costs are the costs that were incurred in the past and cannot be recovered. In capital decision-making, sunk costs should not be considered as they are irrelevant to the current decision.
3. Opportunity Costs: Opportunity cost is the cost of the best alternative forgone in order to choose a particular course of action. It is important to consider the potential benefits of alternative projects in order to make the best capital decision.
4. Relevant Cash Flows: Relevant cash flows are the cash flows that are directly affected by a capital decision. These include the incremental cash inflows and outflows that result from undertaking or not undertaking a project.