Question

When evaluating the cash flows associated with a capital budgeting project, the shipping and installation costs associated with the purchase of an asset are included in the computation of the: __________a. incremental operating cash flows, because shipping and installation costs represent expenses that must be written off "annually over the life of the project. b.project's opportunity cost, because these costs increase the potential of the project. c. terminal cash flows, because these expenses are not paid until the end of the project's life. d. sunk costs, because these expenses do not affect any cash flows associated with purchasing the project. e. initial investment outlay, because these expenses are part of the project's depreciable basis.

Answer 1

e. initial investment outlay, because these expenses are part of the project's depreciable basis.

Step-by-step explanation:

As we know that the net present value, accounting rate of return, internal rate of return, etc are the methods of capital budgeting techniques that derives whether the project should be accepted or rejected

The initial investment is the amount which is invested in the project to get a better return after some time period say 3 to 5 years

Moreover, the initial investment involves purchase cost, training cost, installation charges, shipping charges, etc

Hence, the correct option is e