Final answer:
Residual cash flows are estimated when the useful lives of alternatives are different, one asset has a shorter economic life than its alternatives, or if it's inconvenient to evaluate the total useful life of an asset. This concept ties into the larger investment principle of present discounted value which is key in long-term financial decisions. Therefore, the answer is D) A & B and also C) A, B & C.
Step-by-step explanation:
Residual cash flows are estimated when A) the useful lives of alternatives are different, B) one asset has a shorter economic life than its alternatives, and C) it is not convenient to evaluate the total useful life of an asset. Therefore, the answer is D) A & B and also C) A, B & C. Essentially, when making investment or funding decisions, businesses must consider the present discounted value of future benefits against the present costs.
This tool is critical for analyzing the profitability of long-term projects and investments by comparing present expenditures with future returns. Discrepancies in the life spans of assets or the difficulty in evaluating the complete lifetime of an asset necessitate the estimation of residual cash flows to make effective financial decisions.